<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------------
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
--- THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) of
--- THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________
Commission File No. 0-10516
---------------------------------------
Lincoln Telecommunications Company
(Exact name of registrant as specified in its charter)
Nebraska 47-0632436
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1440 M Street, Lincoln, Nebraska 68508
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 402-436-5289
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the Registrant's
classes of Common Stock as of the latest practicable date.
Class of Common Stock Outstanding at March 31, 1996
$.25 par Value 36,652,719
<PAGE>
PART I - FINANCIAL INFORMATION
LINCOLN TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
The following consolidated financial statements of Lincoln
Telecommunications Company and its wholly owned subsidiaries have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC) and, in the opinion of management, include all
adjustments necessary for a fair statement of income for each period shown.
All such adjustments made are of a normal recurring nature except when
noted as extraordinary or nonrecurring. Certain information and footnote
disclosures normally included in consolidated financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such SEC rules and regulations.
Management believes that the disclosures made are adequate and that the
information is fairly presented. The results for the interim periods are
not necessarily indicative of the results for the full year. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto in the 1995 Annual
Report on Form 10-K, which are incorporated by reference.
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<PAGE>
Item 1 - Financial Statements
<TABLE>
LINCOLN TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Mar. 31, 1996 Dec. 31, 1995
(Unaudited) (Audited)
(Dollars in Thousands)
<CAPTION>
ASSETS
<S> <C> <C>
Current assets $ 74,926 $ 84,102
Property and equipment less accumulated
depreciation and amortization 253,307 255,262
Investments and other assets 172,072 171,100
Deferred charges 12,320 9,857
--------- ---------
Total assets $ 512,625 $ 520,321
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note(s) payable to bank(s) $ 2,000 $ 10,000
Accounts payable and accrued liabilities 62,160 64,764
--------- ---------
Total current liabilities 64,160 74,764
--------- ---------
Deferred credits and other long-term liabilities 64,905 63,805
--------- ---------
Long-term debt 114,639 117,708
--------- ---------
Preferred stock, 5%, redeemable 4,499 4,499
Stockholders' equity 264,422 259,545
--------- ---------
Total liabilities and stockholders' equity $ 512,625 $ 520,321
========= =========
</TABLE>
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<PAGE>
<TABLE>
LINCOLN TELECOMMUNICATIONS COMPANY
CONSOLIDATED STATEMENT OF EARNINGS*
(UNAUDITED)
Three Months Ended
Mar 31, 1996 Mar 31, 1995
(Dollars in Thousands Except Per Share Data)
<CAPTION>
<S> <C> <C>
Telephone revenues:*
Local network services $ 18,448 $ 17,514
Access services 14,070 13,197
Long distance services 8,341 8,070
Other wireline communications services 6,325 5,905
------- -------
Total telephone revenues 47,184 44,686
Wireless communications services 13,019 3,159
Telephone equipment sales and services 4,998 4,243
Intercompany revenues (2,057) (1,757)
------- -------
Total operating revenues 63,144 50,331
------- -------
Operating expenses:
Depreciation and amortization 11,332 8,091
Other operating expenses 35,917 27,793
Taxes, other than payroll and income 817 874
Intercompany expenses (2,057) (1,757)
------- -------
Total operating expenses 46,009 35,001
------- -------
Operating income 17,135 15,330
------- -------
Non-operating income and expense:
Income from interest and other
investments 2,031 1,445
Interest expense and other deductions 2,651 1,699
------- -------
Net non-operating expense 620 254
------- -------
Income before income taxes 16,515 15,076
Income taxes 6,697 5,836
------- -------
Net income 9,818 9,240
Preferred dividends 56 56
------- -------
Earnings available for common shares $ 9,762 $ 9,184
======= =======
(Continued on following page)
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<PAGE>
LINCOLN TELECOMMUNICATIONS COMPANY
CONSOLIDATED STATEMENT OF EARNINGS (Cont'd)*
(UNAUDITED)
Three Months Ended
Mar 31, 1996 Mar 31, 1995
(Dollars in Thousands Except Per Share Data)
Earnings per common share $ .27 $ .28
======= =======
Weighted average common shares outstanding
(in thousands) 36,647 32,372
======= =======
Dividends declared per common share $ .15 $ .14
======= =======
*Certain reclassifications have been made to the historical consolidated
statements of earnings to conform to the current presentation.
</TABLE>
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<PAGE>
<TABLE>
LINCOLN TELECOMMUNICATIONS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
Mar. 31, 1996 Mar. 31, 1995
(Dollars in Thousands)
<CAPTION>
<S> <C> <C>
Cash flows from operating activities:
Net income $ 9,818 $ 9,240
-------- --------
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 11,339 8,098
Net change in investments and other assets (848) (118)
Deferred income taxes 1,484 247
Changes in assets and liabilities resulting
from operating activities:
Receivables 2,154 (26)
Other assets 1,252 (172)
Accounts payable and accrued expenses (5,112) 916
Other liabilities 2,735 4,111
-------- -------
Total adjustments 13,004 13,056
-------- --------
Net cash provided by operating
activities 22,822 22,296
-------- --------
Cash flows from investing activities:
Expenditures for property and equipment (8,504) (13,280)
Net salvage on retirements (1) (100)
-------- --------
Net capital additions (8,505) (13,380)
Proceeds from sale of investments and other
assets 31 --
Purchases of investments and other assets (990) (1,208)
Purchases of temporary investments (1,669) (439)
Maturities and sales of temporary investments 2,010 2,095
-------- --------
Net cash used for investing
activities (9,123) (12,932)
-------- --------
Cash flows from financing activities:
Dividends to stockholders (5,549) (4,585)
Proceeds from issuance of notes payable -- 1,350
Retirement of notes payable (8,000) (4,000)
Retirement of long term debt (3,687) --
Net purchases and sales of treasury stock 615 483
-------- --------
Net cash used in
financing activities (16,621) (6,752)
-------- --------
(Continued on following page)
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<PAGE>
LINCOLN TELECOMMUNICATIONS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont'd)
(UNAUDITED)
Three Months Ended
Mar. 31, 1996 Mar. 31, 1995
(Dollars in Thousands)
Net increase (decrease) in cash and cash
equivalents (2,922) 2,612
Cash and cash equivalents at beginning of year 21,151 22,038
-------- --------
Cash and cash equivalents at end
of quarter $ 18,229 $ 24,650
======== ========
Supplemental disclosures of cash flow information:
Interest paid $ 1,034 $ 359
======== ========
Taxes paid $ 2 $ 1,780
======== ========
</TABLE>
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<PAGE>
LINCOLN TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Business
The consolidated Form 10-Q reflects the operations of Lincoln
Telecommunications Company (the Company) and its wholly owned subsidiaries.
The primary subsidiary is The Lincoln Telephone and Telegraph Company
(LT&T) which provides local and long distance telephone service in 22
southeastern counties of Nebraska. It provides cellular telecommunications
services in the Lincoln, Nebraska Metropolitan Statistical Area (MSA)
(which includes all of Lancaster County in Nebraska) under the name of
Lincoln Telephone Cellular. Nebraska Cellular Telephone Corporation (NCTC)
provides cellular service outside the Lincoln and Omaha metropolitan areas
in Nebraska. NCTC was acquired July 13, 1995, and this acquisition was
accounted for as a purchase and is further described in Part II, Item 5 of
this report. LinTel Systems Inc. (LinTel) provides toll services beyond
LT&T's local service territory, sales of non-regulated telecommunications
products and services and telephone answering services. Prairie
Communications, Inc. (Prairie) has a 50% investment in, and is the
operating partner of, a general partnership with Centel Nebraska, Inc.
(Centel) which manages a limited partnership providing cellular
telecommunications services in the Omaha MSA (which includes Douglas and
Sarpy Counties in Nebraska and Pottawatomie County in Iowa). The limited
partnership is doing business as First Cellular Omaha (FCO). A joint
venture with Anixter Bros., Inc., doing business as Anixter-Lincoln,
warehouses and distributes electrical wire, cable, and communications
products in a six-state area which includes Nebraska, North and South
Dakota, Wyoming, Montana and Idaho. Effective October 1, 1995, the Company
sold 30% of its interest in Anixter-Lincoln, reducing its ownership to 20%.
The Telecommunications Act of 1996 was signed into effect in February 1996.
The bill facilitates the entry of new competitors into the local exchange
market by allowing companies to purchase and resell Local Exchange Carrier
(LEC) services, by requiring companies to unbundle their networks, and by
requiring LEC's to negotiate interconnection agreements with companies who
want connection to LEC networks. However, the Telecommunications Act of
1996 also provides opportunities for the Company, such as entry into the
cable television market, and entry into new geographic markets with either
a full range of services or selected services to niche markets.
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<PAGE>
(2) Prior Year Accounting Changes
Financial Accounting Standard (FAS) No. 71, "Accounting for the Effects of
Certain Types of Regulation," generally applies to regulated companies that
meet certain requirements, including a requirement that a company be able
to recover its costs by charging its customers rates prescribed by
regulators and that competition will not threaten the recovery of those
costs. Having achieved price regulation and recognizing potential
increased competition, the Company concluded, in the fourth quarter of
1995, that the principles prescribed by FAS 71 were no longer appropriate.
As a result, a non-cash, extraordinary charge of $16,516,000, net of an
income tax benefit of $9,352,000, was incurred by LT&T in December 1995.
On adoption of FAS 109, "Accounting for Income Taxes," in 1993, adjustments
were required to adjust excess deferred tax levels to the currently enacted
statutory rates as regulatory liabilities and regulatory assets were
recognized on the cumulative amount of tax benefits previously flowed
through to ratepayers. These tax-related regulatory assets and liabilities
were grossed up for the tax effect anticipated when collected at future
rates. At the time the application of FAS 71 was discontinued, the tax-
related regulatory assets and regulatory liabilities were eliminated and
the related deferred taxes were adjusted to reflect application of FAS 109
consistent with unregulated entities.
(3) Managed Cellular Markets
The Company manages all four cellular entities in which it has an ownership
interest. The Lincoln MSA and NCTC are wholly-owned markets containing
approximately 221,000 and 883,000 POPs, respectively. Through its general
partnership with Centel, the Company holds a 27.6% interest in the limited
partnership, which operates the Omaha MSA market, containing approximately
627,000 POPs. The Company also holds an option to purchase an additional
27.6% interest in the partnership commencing on December 31, 1996, and
continuing for the two-year period thereafter.
In addition, the Company has an 11.8% interest in Iowa Rural Service Area 1
(RSA 1) which is contiguous to the Company's telephone operating area in
Nebraska and to Omaha, and contains approximately 61,000 POPs. By the end
of first quarter 1996, penetration (subscribers compared to POPs) rates
achieved in these markets by the entities in which the Company holds
interests were 14.3% in the Lincoln MSA, 10.3% in NCTC RSA's, 8.2% in the
Omaha MSA, and 5.0% in RSA 1.
-8-
<PAGE>
The Company believes the use of proportionate operating data for these
managed cellular markets facilitates the understanding and assessment of
its consolidated financial statements. Reporting proportionate data for
the cellular markets is not in accordance with generally accepted
accounting principles. The proportionate data summarized below reflects
the Company's relative ownership interests in its managed markets.
Supplemental Proportionate Data For Managed Cellular Markets (1)
First Quarter
(dollars in thousands)
Unaudited
Total
Total Total Not Proportionate
Consolidated(2) Consolidated(3) Data
Customer Lines 1996 117,514 14,614 132,128
1995 22,469 9,830 32,299
1994 14,680 6,782 21,462
Service Revenues 1996 $ 12,995 $ 1,747 $ 14,742
1995 3,018 1,292 4,310
1994 2,147 984 3,131
Operating Expenses 1996 $ 8,031 $ 1,071 $ 9,102
(before depreciation) 1995 1,576 822 2,398
1994 1,172 695 1,867
Net Operating Income 1996 $ 3,294 $ 429 $ 3,723
1995 1,192 285 1,477
1994 (2,643) (2,004) (4,647)
EBITDA (4) 1996 $ 4,964 $ 676 $ 5,640
1995 1,442 470 1,912
1994 975 289 1,264
(1) The Company's interest in NCTC is not included in the
proportionate data prior to acquisition in July 1995.
(2) Financial activities of the Lincoln MSA and NCTC since
acquisition are included in respective operating portions of
the Company's Consolidated Statements of Earnings.
(3) The Company's share of the financial activities of the Omaha
MSA (27.6%) and the Iowa RSA 1 (11.8%) are not included in
the operating portions of the Company's Consolidated
Statements of Earnings.
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<PAGE>
(4) Earnings before interest, taxes, depreciation and
amortization is commonly used in the cellular communications
industry to analyze cellular providers on the bases of
operating performance, and liquidity. EBITDA should not be
considered an alternate to (i) operating income (as
determined in accordance with generally accepted accounting
principles) as an indicator of the Company's operating
performance or (ii) cash flows from operating activities (as
determined in accordance with generally accepted accounting
principles) as a measure of liquidity.
(4) Restructuring Charges and Work Force Reduction
In 1995, LT&T, the local operating company, reduced its operator service
work force from 140 to approximately 50 employees. The current work force
handles the Company's long distance operator service needs. The Company
offered retirement and separation incentives along with out-placement
services to those employees affected by the work force adjustment. These
actions resulted in a pre-tax non-recurring charge of $1,555,000 or $937,000
after the income tax effect, reducing 1995 earnings per share by $0.03.
Savings resulting from new procedures are expected to offset this non-
recurring charge within two years.
In addition, in November 1995, the Company announced its plans to reduce
its existing work force by offering a voluntary early retirement program to
eligible employees. The eligible employees are both management and non-
management employees who are employed by the Company, LT&T and LinTel. The
Company implemented an enhancement to the Company's pension plan by adding
five years to both the age and net credited service for eligible employees.
The program also provides for the employees to receive a lump-sum payment and
a supplemental monthly income payment in addition to their normal pension.
As a result of 330 employees accepting this voluntary early retirement
offer, the Company recorded a reduction to the Company's pension asset and
recognized a restructuring charge of $20.1 million at December 31, 1995.
The charge included pension enhancements of $23.4 million and curtailment
gains of $3.3 million.
(5) Income Taxes
Total income tax expense for the three-month periods ended March 31, 1996
and 1995 was $6,697,000 and $5,836,000, respectively, and was comprised
solely of income taxes on income from continuing operations. Income tax
expense (benefit) attributable to income from continuing operations for the
three-month periods ended March 31, 1996 and 1995 consists of the following:
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<PAGE>
Three Months Ended March 31,
1996 1995
------------ ------------
Current
U.S. Federal $ 4,529,000 $ 4,776,000
State and local 1,045,000 1,066,000
------------ ------------
Total current tax expense 5,574,000 5,842,000
Deferred
U.S. Federal 1,105,000 152,000
State and local 209,000 126,000
------------ ------------
Total deferred tax expense 1,314,000 278,000
Investment tax credits (191,000) (284,000)
------------ ------------
Total income tax expense $ 6,697,000 $ 5,836,000
============ ============
Income tax expense differed from the amounts computed by applying the U. S.
Federal income tax rate of 35 percent to pretax income from continuing
operations as stated in the following:
Three Months Ended March 31,
1996 1995
------------ ------------
Computed "expected" tax expense $ 5,780,000 $ 5,277,000
Increase (reduction) in
income taxes resulting from:
State and local taxes, net
of Federal tax benefit 816,000 775,000
Amortization of goodwill 280,000 0
Non-taxable interest income (20,000) (31,000)
Amortization of regulatory
deferred charges 0 479,000
Amortization of regulatory
deferred liabilities 0 (448,000)
Amortization of investment
tax credits (191,000) (284,000)
Other, net 32,000 68,000
------------ ------------
Total income tax expense $ 6,697,000 $ 5,836,000
============ ============
The significant components of deferred income tax expense (benefit)
attributable to income from continuing operations for the three-month
periods ended March 31, 1996 and 1995 were the following:
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<PAGE>
Three Months Ended March 31,
1996 1995
------------ ------------
Deferred tax expense $ 1,314,000 $ 247,000
Amortization of regulatory
deferred charges 0 479,000
Amortization of regulatory
deferred liabilities 0 (448,000)
------------ ------------
Total deferred tax expense $ 1,314,000 $ 278,000
============ ============
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at March
31, 1996 and December 31, 1995 are presented below:
March 31, 1996 December 31, 1995
------------------ -----------------
Deferred tax assets:
Accumulated post-retirement
benefit cost $17,723,000 $17,493,000
Voluntary Early Retirement
Program 7,168,000 7,697,000
Other 2,515,000 3,091,000
------------ ------------
Total gross deferred
tax assets 27,406,000 28,281,000
Less valuation allowance -- --
------------ ------------
Net deferred tax assets $27,406,000 $28,281,000
============ ============
Deferred tax liabilities:
Plant and equipment,
principally due to
depreciation differences $33,963,000 $33,011,000
Other 3,039,000 3,382,000
------------ ------------
Total gross deferred tax
liabilities 37,002,000 36,393,000
------------ ------------
Net deferred tax
liabilities $ 9,596,000 $ 8,112,000
============ ============
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<PAGE>
As a result of the nature and amount of the temporary differences which
give rise to the gross deferred tax liabilities and the Company's expected
taxable income in future years, no valuation allowance for deferred tax
assets is expected for 1996.
(6) Postretirement Benefits
In addition to the Company's defined benefit pension plan, the Company
sponsors a health care plan (Plan) that provides postretirement medical
and other benefits to employees who meet minimum age and service
requirements upon retirement.
The following table presents the Plan's status reconciled with amounts
recognized in the Company's consolidated balance sheet at December 31,
1995:
Accumulated Postretirement Benefit Obligation:
Retirees $29,520,000
Active plan participants - fully eligible 12,012,000
Active plan participants - other 10,161,000
------------
51,693,000
Unrecognized prior service cost (1,710,000)
Unrecognized net loss (5,660,000)
------------
Accrued postretirement benefit costs $44,323,000
============
For purposes of measuring the benefit obligation, a discount rate of 8.0%
and an 11.3% annual rate of increase in the per capita cost of covered
benefits (i.e., health care cost trend rate) was assumed for 1995. The
projected rates for 1996 are 8.0% and 11.3%, respectively. The health care
cost trend rate of increase was assumed to decrease gradually to 5.5% by
the year 2004.
The Company has not designated any assets to fund Plan obligations. Net
periodic postretirement benefit costs for the three-month periods ended
March 31, 1996 and 1995 include the following components:
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<PAGE>
Three Months Ended March 31,
1996 1995
------------ ------------
Service cost $ 124,000 $ 96,000
Interest cost 1,010,000 982,000
Unrecognized prior service cost 28,000 3,000
Amortization of
unrecognized loss 8,000 49,000
------------ ------------
Net periodic postretirement
benefit costs $ 1,170,000 $ 1,130,000
============ ============
For purposes of measuring the benefit cost, a discount rate of 8.0% and an
11.7% annual rate of increase in the health care cost trend rate was
assumed for 1996, 8.0% and 11.7% for 1995. This rate of increase was
assumed to decrease gradually to 5.5% by the year 2004. The health care
cost trend rate assumptions have a significant effect on the amounts
reported.
(7) Temporary Investments
The Company applies the provisions of Statement of Financial Accounting
Standards (FAS) No. 115, "Accounting for Certain Investments in Debt and
Equity Securities."
FAS No. 115 requires fair value reporting for certain investments in debt
and equity securities. Pursuant to FAS No. 115, the Company has classified
all of its investments as "available for sale" at March 31, 1996 and 1995.
This information is summarized as follows:
March 31, 1996
--------------------------------------------
Estimated
Amortized Gross Unrealized Market
Cost Gains Losses Value
--------- ----- ------ ---------
Equity Securities $ 1,222,000 44,000 (33,000) 1,233,000
U.S. Government obligations 1,697,000 1,000 (46,000) 1,652,000
U.S. Government agency
obligations 5,958,000 83,000 (101,000) 5,940,000
Corporate debt securities 3,845,000 68,000 (150,000) 3,763,000
----------- ------- --------- ----------
$12,722,000 196,000 (330,000) 12,588,000
=========== ======= ========= ==========
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<PAGE>
March 31, 1995
--------------------------------------------
Estimated
Amortized Gross Unrealized Market
Cost Gains Losses Value
--------- ----- ------ ---------
Equity Securities $ 1,275,000 1,000 (61,000) 1,215,000
U.S. Government obligations 795,000 -- (70,000) 725,000
U.S. Government agency
obligations 9,388,000 94,000 (135,000) 9,347,000
Corporate debt securities 10,565,000 64,000 (426,000) 10,203,000
----------- ------- --------- ----------
$22,023,000 159,000 (692,000) 21,490,000
=========== ======= ========= ==========
The net unrealized loss on investments available for sale is not reported
separately as a component of stockholders' equity due to its insignificance
to the consolidated balance sheet at March 31, 1996 and 1995.
The amortized cost and estimated market value of debt securities at March
31, 1996 and 1995, by contractual maturity, are shown in the following table.
Expected maturities will differ from the contractual maturities because
borrowers may have the right to call or prepay obligations with or without
call or prepayment penalties.
March 31, 1996
------------------------
Estimated
Amortized Market
Cost Value
--------- ---------
Due after three months through five years $ 9,195,000 $ 9,112,000
Due after five years through ten years 2,305,000 2,243,000
----------- -----------
$11,500,000 $11,355,000
=========== ============
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<PAGE>
March 31, 1995
------------------------
Estimated
Amortized Market
Cost Value
--------- ---------
Due after three months through five years $18,137,000 $17,980,000
Due after five years through ten years 2,611,000 2,295,000
----------- -----------
$20,748,000 $20,275,000
=========== ============
The gross realized gains and losses on the sale of securities were
insignificant to the consolidated financial statements for the three months
ended March 31, 1996 and 1995. The Company does not invest in securities
classified as held to maturity or traded securities.
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<PAGE>
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
Total capital additions to communications facilities for 1996 are now
projected to be $51,498,000. During the three-month period ended March 31,
1996, cash provided by operating activities, less dividends paid, exceeded
capital expenditures.
The Company consummated the acquisition of NCTC on July 13, 1995. In
connection with this acquisition, the following assets were acquired,
liabilities assumed/incurred and common stock issued (in thousands):
Property, plant and equipment $ 28,101
Excess cost of net assets acquired 124,609
Notes payable assumed (17,890)
Other assets and liabilities,
excluding cash and cash equivalents 2,167
Prior investment in NCTC (6,282)
Common stock issued (70,408)
Issuance of long-term debt (60,000)
---------
Decrease in cash $ 297
=========
This acquisition is reflected in the investing activities of the Company's
consolidated statement of cash flows further explained in Part II, Item 5.
As of March 31, 1996, the Company had $114,639,000 of long-term debt,
consisting of the following:
- $44,000,000 of First Mortgage Bonds due June 1, 2000.
- A $30,000,000 variable rate term loan due in 13 consecutive quarterly
installments commencing on September 15, 1997.
- A $27,000,000 variable rate revolving loan with principal due July 6,
1998, and interest due monthly.
- $15,861,000 of various variable rate Rural Telephone Finance
Cooperative (RTFC) loan agreements maturing through 2002.
- Less current installments of long-term debt of $2,222,000.
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<PAGE>
Results of Operations
Revenues
First Quarter 1996
Increase (Decrease)
Over First
Quarter 1995
-------------------
Operating revenues:
Telephone revenues:
Local network services 5.3%
Access services 6.6%
Long distance services 3.4%
Other wireline communications 7.1%
services
Total telephone revenues 5.6%
Wireless communications services 312.1%
Telephone equipment sales and 17.8%
services
Intercompany revenues 17.1%
Total operating revenues 25.5%
All comparisons hereinafter made are of the first quarter for 1996 with the
same period in 1995. The adjustments included are all of a normal
recurring nature except when noted as extraordinary or nonrecurring.
Local network services revenue increased $934,000 (5.3%). Basic local
services revenue increased $620,000 (4.9%) led by growth in revenue from
residence, small business, and PBX services for the three-month period.
Residential and business telephone access lines in service grew by 7,532
(3.0%) from March 31, 1995. Expanded area services revenue increased
$282,000 (15.9%) because of increased usage.
Access services revenue increased $873,000 (6.6%). Overall minutes of
access use increased by 8.7%.
Other wireline communications services revenues, consisting of directory
advertising and sales, carrier billing and collections, data
communications, and miscellaneous items, increased $420,000 (7.1%). Data
communications growth has been strong, mainly due to the introduction in
1995 of NAVIX, the Company's Internet access service.
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<PAGE>
Wireless communications revenues increased dramatically for the three-month
period, principally due to the merger with NCTC. These revenues increased
$9,860,000 (312.1%), of which $8,965,000 are revenues from NCTC. Lincoln
Telephone Cellular revenues increased $872,000 (28.9%) for the three-month
period and added 9,037 new customers. Customer penetration rates reached
14.3% for Lincoln Telephone Cellular and 10.3% for NCTC at the end of March
1996.
Telephone equipment sales and services revenues increased $755,000 (17.8%)
for the three-month period, led by increased sales of business
telecommunication products and services.
Overall, total operating revenues increased $12,813,000 (25.5%) for the
three-month period ended March 31, 1996 over the same period in 1995.
Operating Expenses
First Quarter 1996
Increase (Decrease)
Over First
Quarter 1995
-------------------
Depreciation and amortization 40.1%
Other operating expenses 29.2%
Taxes, other than payroll
and income (6.5%)
Intercompany expenses 17.1%
Total operating expenses 31.5%
All comparisons hereinafter made are of the first quarter for 1996 with the
same period in 1995. The adjustments included are all of a normal
recurring nature except when noted as extraordinary or nonrecurring.
Depreciation and amortization increased $3,241,000 (40.1%). This is due
principally to the integration of NCTC's depreciation expense of
$1,261,000, and amortization of $799,000 associated with the merger with
NCTC. Also, as a result of discontinuance of FAS 71, depreciation expense
for LT&T is now based on estimated economic useful lives rather than those
prescribed by regulatory commissions, causing an additional increase in
depreciation of $668,000.
Other operating expenses increased by $8,124,000 (29.2%). The acquisition
of NCTC and inclusion of its operating expenses of $5,602,000 led to this
increase. Excluding NCTC, other operating expenses grew by 9.1% as a
result of the cost of increased sales.
Overall, total operating expenses increased $11,008,000 (31.5%) for the
three-month period ended March 31, 1996, over the same period in 1995.
-19-
<PAGE>
Non-Operating Income (Expense)
First Quarter 1996
Increase (Decrease)
Over First
Quarter 1995
-------------------
Income from interest and
other investments 40.6%
Interest expense and other
deductions 56.0%
Net non-operating expense 144.1%
Income from interest and other investments increased $586,000 (40.6%). The
increase is primarily attributable to three factors: 1) the Company's
portion of the loss from Omaha Cellular General Partnership decreased by
$114,000 compared to last year; 2) interest income of $182,000 contributed
from new acquisitions; and 3) an increase in income arising from temporary
cash investments.
Interest expense and other deductions increased $952,000 (56.0%). The
increase is due to additional outstanding debt resulting from the
acquisition of NCTC in July 1995.
Income Taxes
Income taxes increased $861,000 (14.8%) for the three-month period. The
increase is attributable to increased taxable income compared to the first
quarter of 1995.
-20-
<PAGE>
PART II - OTHER INFORMATION
Item 1-3 - Not applicable
Item 4 - Name Change
Stockholders approved the amendment to the articles of
incorporation changing the name of the Company from Lincoln
Telecommunications Company to Aliant Communications Inc. at the
annual meeting April 24, 1996. The name change was approved by
a vote of 27,444,469 for the name change, and 2,048,846 against,
for a total of 29,493,315 votes. The name change is expected to
become effective in the third quarter of 1996.
Item 5 - Purchase of Common Stock
On April 24, 1991 the Board of Directors of the Company
authorized the Company to purchase up to 600,000 shares of its
common stock from time to time as market conditions warrant.
As of March 31, 1996, 290,926 shares have been purchased.
These purchases are in addition to the purchases which the
Company has been making for purposes of satisfying participant
requirements under the Employee and Stockholder Dividend
reinvestment and Stock Purchase Plan, satisfying Employer
Matching and Stock Bonus Contributions under the Company's
401(k) Savings and Stock Ownership Plan and satisfying
participant requirements under the Company's 1989 Stock and
Incentive Plan.
Acquisition
On July 13, 1995, the Company completed the acquisition of all
of the issued and outstanding common stock of Nebraska
Cellular Telephone Corporation, a Nebraska corporation
("NCTC"). NCTC provides cellular service outside the Lincoln
and Omaha metropolitan areas in Nebraska. Its network serves
cellular users with transparent interconnection along the
Interstate 80 corridor and other major highway systems across
Nebraska. Prior to the acquisition, the Company owned
approximately 16% of NCTC's outstanding common stock. As
consideration for the remaining 84%, the Company issued to the
shareholders of NCTC an aggregate of 4,267,146 shares of
Company Common Stock and paid approximately $61.6 million in
cash. NCTC operates as a wholly-owned subsidiary of the
Company.
Labor Agreements
New three-year agreements between LT&T and the Communications
Workers of America (CWA) became effective on October 16, 1995.
A new three-year agreement between LinTel and the CWA was
reached and became effective on May 20, 1995. Each agreement
addressed wages and general working conditions. The LT&T
agreement included a general wage increase of 10.9% over the
three-year period ending October 15, 1998.
-21-
<PAGE>
Item 6 - a) See Exhibit Index.
b) On July 27, 1995, Registrant filed a Form 8-K to report
the completion of the merger of Nebraska Cellular
Telephone Corporation with and into a wholly-owned
subsidiary of the Registrant.
-22-
<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 thereunto duly authorized.
Lincoln Telecommunications Company
----------------------------------
(Registrant)
May 15, 1996 /s/ Robert L. Tyler
Date..................... ......................................
(Signature)
Robert L. Tyler, Senior Vice President-
Chief Financial Officer
May 15, 1996 /s/ Michael J. Tavlin
Date..................... ......................................
(Signature)
Michael J. Tavlin, Vice President-
Treasurer
____________________________
*See General Instruction G
**Print name and title of the signing officer under his signature.
-23-
<PAGE>
Form 10-Q
Exhibit Index
Exhibit Title Page No.
27 Financial Data Schedule
-24-
<PAGE>
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