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 (Date of earliest event reported): May 4, 2000
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Telephone and Data Systems, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 001-14157 36-2669023
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
30 North LaSalle Street, Chicago, Illinois 60602
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 312-630-1900
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Not Applicable
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(Former name or former address, if changed since last report)
<PAGE>
Item 2. Disposition of Assets
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On May 4, 2000, pursuant to the terms of an Agreement and Plan
of Reorganization (the "Agreement"), dated as of September 17, 1999,
among VS Washington Corporation, a Washington Corporation formerly
known as VoiceStream Wireless Corporation, VoiceStream Wireless
Corporation, a Delaware Corporation formerly known as VoiceStream
Holding Corporation ("VoiceStream"), VoiceStream Subsidiary III
Corporation, a Delaware Corporation and wholly-owned subsidiary of
VoiceStream ("Sub"), Aerial Communications, Inc., a Delaware
corporation ("Aerial"), and Telephone and Data Systems, Inc., a
Delaware corporation ("TDS"), Sub was merged with and into Aerial. In
connection therewith, each of the outstanding Aerial Common Shares, par
value $1.00 per share, and Aerial Series A Common Shares, par value
$1.00 per share, held by TDS, was converted into .455 of a share of
VoiceStream common stock, par value $.001 per share, and cash in lieu
of any fractional shares. Based upon this exchange ratio, TDS received,
in the Reorganization, an aggregate of 35,570,493 shares of VoiceStream
common stock in exchange for an aggregate of 78,176,909 shares of
Aerial common stock beneficially owned.
Item 7. Financial Statements and Exhibits
---------------------------------
(b) Pro Forma Financial Information
The following unaudited pro forma consolidated financial statements
give effect to the exchange of TDS's interest in Aerial for 35,570,493
common shares of VoiceStream.
The unaudited pro forma balance sheet presents the financial position
of TDS as of March 31, 2000, assuming the exchange had occurred as of
that date. Such pro forma information is based on the historical
unaudited balance sheet of TDS at March 31, 2000.
Pursuant to Rule 11-02(c)(2)(i) of Regulation S-X, pro forma statements
of income for the year ended December 31, 1999 and the three months
ended March 31, 2000 are not included here as these historical income
statements already reflect the above transaction in discontinued
operations. Rule 11-02(b)(5) of Regulation S-X requires the pro forma
disclosures to include income from continuing operations. All
applicable operating results as well as nonrecurring charges, credits
and related tax effects which resulted from the transaction have been
included in discontinued operations.
The unaudited pro forma financial statements give effect to certain pro
forma adjustments, which are described in the notes to these
statements.
The unaudited pro forma financial information is presented for
informational purposes only and is not necessarily indicative of the
results of operations and financial position which would have been
achieved had this transaction been completed as of the date indicated,
nor is it necessarily indicative of TDS's future results of operations
or financial position.
The unaudited pro forma financial statements should be read in
conjunction with the historical financial statements of TDS, including
the notes thereto.
(c) Exhibits
99.1 News release dated May 5, 2000.
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<TABLE>
<CAPTION>
TELEPHONE AND DATA SYSTEMS, INC. AND SUBSIDIARIES
PRO FORMA BALANCE SHEET
ASSETS
(amounts in thousands)
As Reported Pro forma Pro forma
March 31, 2000 Adjustments March 31, 2000
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<S> <C> <C> <C>
CURRENT ASSETS
Cash and Cash equivalents $ 43,838 $ 60,836 (a) $ 104,674
Temporary investments 4,045 4,045
Accounts receivable from customers and others 274,136 5,814 (a) 279,950
Materials and supplies, at average cost
and other current assets 76,751 76,751
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398,770 66,650 465,420
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INVESTMENTS
Intangibles
Cellular license acquisition costs, net 1,150,004 1,150,004
Franchise and other costs, net 176,365 176,365
Investment in unconsolidated entities 262,045 262,045
Marketable equity securities 893,844 4,581,942 (c) 5,475,786
Other investments 28,799 28,799
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2,511,057 4,581,942 7,092,999
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PROPERTY, PLANT AND EQUIPMENT
U.S. Cellular 1,206,017 1,206,017
TDS Telecom 873,317 873,317
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2,079,334 0 2,079,334
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OTHER ASSETS AND DEFERRED CHARGES 54,000 54,000
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NET ASSETS OF DISCONTINUED OPERATIONS 288,292 (66,650)(a) 0
------------- 1,986 (b) -------------
(223,628)(c)
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TOTAL ASSETS $ 5,331,453 $ 4,360,300 $ 9,691,753
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TELEPHONE AND DATA SYSTEMS, INC. AND SUBSIDIARIES
PRO FORMA BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
(amounts in thousands)
As Reported Pro forma Pro forma
March 31, 2000 Adjustments March 31, 2000
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<S> <C> <C> <C>
CURRENT LIABILITIES
Current portion long-term debt $ 14,953 $ 14,953
Notes payable 7,700 7,700
Accounts payable 177,735 177,735
Advance billings and customer deposits 47,705 47,705
Accrued interest 10,145 10,145
Accrued taxes 20,148 $ 14,798 (c) 34,946
Accrued compensation 29,574 29,574
Other 25,563 1,986 (b) 27,549
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333,523 16,784 350,307
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DEFERRED LIABILITIES AND CREDITS 450,979 1,629,203 (c) 2,080,182
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LONG-TERM DEBT 1,277,774 1,277,774
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MINORITY INTEREST 499,295 499,295
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TRUST ORIGINATED PREFERRED SECURITIES 300,000 300,000
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PREFERRED SHARES 8,806 8,806
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COMMON STOCKHOLDERS' EQUITY
Common Shares 554 554
Series A Common Shares 70 70
Capital in excess of par 1,874,786 1,874,786
Treasury Shares (158,789) (158,789)
Accumulated Other Comprehensive Income 203,960 203,960
Retained earnings 540,495 2,714,313 (c) 3,254,808
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2,461,076 2,714,313 5,175,389
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TOTAL LIABILITIES AND EQUITY $ 5,331,453 $ 4,360,300 $ 9,691,753
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</TABLE>
<PAGE>
Notes to Unaudited Pro Forma Condensed Balance Sheet
(a) The adjustment is to record the settlement of intercompany amounts
between TDS affiliates and Aerial Communications, Inc.
(b) The adjustment is to record miscellaneous costs related to the merger.
(c) The adjustment is to record the estimated gain on the disposal of
Aerial. The value of VoiceStream shares was determined by multiplying
the 35,570,493 shares of VoiceStream held by TDS by the closing market
price at March 31, 2000 of $128.813. Aerial's deferred operating losses
since September 18, 1999 and other costs associated with the merger are
included in TDS's basis in Aerial. The gain was calculated as follows:
Value of VoiceStream shares received $ 4,581,942,000
TDS's basis in Aerial (223,628,000)
Income Taxes (1,644,001,000)
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Gain $ 2,714,313,000
===============
The gain to be recorded in the second quarter of 2000 will not be the
same as the gain included in the pro forma balance sheet. The primary
difference will result from the value of VoiceStream shares being
calculated using the May 4, 2000 closing price of $109.625. Other
differences will occur due to the true up of estimated expenses related
to the merger.
<PAGE>
SIGNATURES
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, thereto duly authorized.
Date: May 19, 2000 TELEPHONE AND DATA SYSTEMS, INC.
(Registrant)
By: /s/ D. Michael Jack
---------------------------------------
Name: D. Michael Jack
Title: Vice President and Controller
(principal accounting officer)
<PAGE>
EXHIBIT INDEX
Exhibit Number Description of Exhibit
- - -------------- ----------------------
99.1 News Release dated May 5, 2000 announcing the
completion of the Aerial / VoiceSteam merger
<PAGE>
Exhibit 99.1
Contact: Mark A. Steinkrauss
Vice President, Corporate Relations
(312) 630-1900 [email protected]
FOR RELEASE: IMMEDIATE
TELEPHONE AND DATA SYSTEMS, INC. ANNOUNCES COMPLETION OF
AERIAL/VOICESTREAM MERGER
May 5, 2000, Chicago, Illinois - The Board of Directors of Telephone and Data
Systems, Inc. [AMEX: TDS], a leading provider of telecommunications services,
announces the completion of the merger of VoiceStream Wireless Corporation and
Aerial Communications. The merger agreement was originally approved by the TDS
Board of Directors on September 17, 1999 and was approved by Aerial shareholders
on February 24, 2000. As a result of the merger, Aerial shareholders will
receive 0.455 shares of VoiceStream Wireless Corporation for each share of
Aerial stock they own or they may elect a cash option. TDS acquired 35.6 million
shares of VoiceStream common stock in the merger, becoming VoiceStream's second
largest shareholder after Hutchison Whampoa Limited. LeRoy T. Carlson, Jr.,
TDS's President and Chief Executive Officer, commented, "TDS is very pleased to
become a substantial VoiceStream shareholder. The VoiceStream GSM network is
compelling and its management is achieving outstanding growth."
In the second quarter, TDS will record an after-tax gain of approximately $ 2.25
billion as a result of the merger of Aerial with VoiceStream. The gain will be
reported as discontinued operations in the consolidated financial statements of
TDS. Substantially all of the income taxes recorded for this transaction are
deferred taxes.
Concurrent with the merger, and in order to comply with FCC guidelines, Murray
L. Swanson, who served with great distinction for almost two decades, stepped
down from TDS's Board of Directors. Mr. Swanson is the former CFO of TDS and
currently is Managing Director of Sonera U.S.
TDS is a Chicago-based telecommunications corporation founded in 1969 with
established wireless and local wireline businesses, and rapidly growing CLEC
operations. Through its strategic business units, U.S. Cellular and TDS Telecom,
TDS provides wireless and local telephone service to customers in rural and
suburban markets around the country. On March 31, 2000, the Company employed
over 8,000 people and served 3.4 million cellular and local telephone customers
in 35 states.
Except for the historical and factual information presented, other information
set forth in this news release represents forward-looking statements, including
all statements about the Company's plans, beliefs, estimates and expectations.
These statements are based on current estimates and projections, which involve
certain risks and uncertainties that could cause actual results to differ
materially from those in the forward-looking statements. Important factors that
may affect these forward-looking statements include, but are not limited to:
changes in the overall economy; changes in competition in the markets in which
TDS operates; advances in telecommunications technology; changes in the
telecommunications regulatory environment; pending and future litigation;
unanticipated changes in growth in cellular customers, penetration rates, churn
rates, roaming rates and the mix of products and services offered in our
markets. Investors are encouraged to consider these and other risks and
uncertainties that are discussed in documents filed by TDS with Securities and
Exchange Commission ("SEC").
For more information about TDS or its subsidiaries, visit the company web sites
at:
TDS: http://www.teldta.com TDS Telecom: http://www.tdstelecom.com
USM: http://www.uscellular.com
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