8-K, 2000-05-19
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                             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

                        Telephone and Data Systems, Inc.
             (Exact name of registrant as specified in its charter)

        Delaware                       001-14157                36-2669023
        --------                       ---------                ----------
 (State or other jurisdiction    (Commission File Number)     (IRS Employer
      of incorporation)                                     Identification No.)

         30 North LaSalle Street, Chicago, Illinois                60602
         ------------------------------------------                -----
          (Address of principal executive offices)               (Zip Code)

          Registrant's telephone number, including area code: 312-630-1900
                                 Not Applicable
          (Former name or former address, if changed since last report)


Item 2.  Disposition of Assets

                  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

         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.



                                     TELEPHONE AND DATA SYSTEMS, INC. AND SUBSIDIARIES
                                                   PRO FORMA BALANCE SHEET
                                                   (amounts in thousands)

                                                                        As Reported           Pro forma                 Pro forma
                                                                       March 31, 2000        Adjustments             March 31, 2000
<S>                                                                     <C>                  <C>                     <C>
      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
                                                                           398,770               66,650                  465,420
           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
                                                                         2,511,057            4,581,942                7,092,999
      U.S. Cellular                                                      1,206,017                                     1,206,017
      TDS Telecom                                                          873,317                                       873,317
                                                                         2,079,334                    0                2,079,334

OTHER ASSETS AND DEFERRED CHARGES                                           54,000                                        54,000

NET ASSETS OF DISCONTINUED OPERATIONS                                      288,292              (66,650)(a)                    0
                                                                     -------------                1,986 (b)            -------------

           TOTAL ASSETS                                                $ 5,331,453          $ 4,360,300              $ 9,691,753




                                       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
<S>                                                                     <C>                 <C>                       <C>
      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
                                                                           333,523              16,784                   350,307

DEFERRED LIABILITIES AND CREDITS                                           450,979           1,629,203 (c)             2,080,182

LONG-TERM DEBT                                                           1,277,774                                     1,277,774

MINORITY INTEREST                                                          499,295                                       499,295

TRUST ORIGINATED PREFERRED SECURITIES                                      300,000                                       300,000

PREFERRED SHARES                                                             8,806                                         8,806

      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
                                                                         2,461,076           2,714,313                 5,175,389

           TOTAL LIABILITIES AND EQUITY                                $ 5,331,453         $ 4,360,300               $ 9,691,753



         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)
              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.



                  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.

                                         By:      /s/ D. Michael Jack
                                         Name:    D. Michael Jack

                                         Title:   Vice President and Controller
                                                  (principal accounting officer)


                                  EXHIBIT INDEX

Exhibit Number                  Description of Exhibit
- - --------------                  ----------------------

99.1                            News Release  dated May 5, 2000  announcing  the
                                completion of the Aerial / VoiceSteam merger


                                                                    Exhibit 99.1

Contact: Mark A. Steinkrauss
         Vice President, Corporate Relations
         (312) 630-1900  [email protected]


                            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

TDS:              TDS Telecom:


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