<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 June 30, 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. 2-39373
---------------------------------------
The Lincoln Telephone and Telegraph Company
(Exact name of registrant as specified in its charter)
Delaware 47-0223220
(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: 402-474-2211
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 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 June 30, 1996
$3.125 par value 1,000 Shares
<PAGE>
PART I - FINANCIAL INFORMATION
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
The following financial statements of The Lincoln Telephone and Telegraph
Company (LT&T) 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 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 financial statements should be read in conjunction with the financial
statements and notes thereto in the 1995 Annual Report on Form 10-K and in
this year's prior Quarterly Report on Form 10-Q, which are incorporated by
reference.
-1-
<PAGE>
Item 1 - Financial Statements
<TABLE>
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
BALANCE SHEET
June 30, 1996 Dec. 31, 1995
(Unaudited) (Audited)
(Dollars in Thousands)
<CAPTION>
ASSETS
<S> <C> <C>
Current assets $ 57,412 $ 61,216
Property and equipment less accumulated
depreciation and amortization 217,992 222,879
Investments and other assets 612 339
Deferred charges 10,597 9,180
-------- --------
Total assets $286,613 $293,614
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Notes payable to banks $ -- $ 8,000
Accounts payable and accrued liabilities 52,176 57,242
-------- --------
Total current liabilities 52,176 65,242
Deferred credits and other long-term liabilities 61,008 59,729
Long-term debt 44,000 44,000
Preferred stock, 5%, redeemable 4,499 4,499
Stockholder's equity 124,930 120,144
-------- --------
Total liabilities and stockholder's equity $286,613 $293,614
======== ========
</TABLE>
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<PAGE>
<TABLE>
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
STATEMENT OF EARNINGS
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
(Dollars in Thousands)
<CAPTION>
<S> <C> <C> <C> <C>
Operating revenues:*
Telephone revenues:
Local network services $18,616 $17,764 $37,064 $35,322
Access services 14,375 12,865 28,445 26,063
Long distance services 3,005 3,356 6,250 6,647
Other wireline communications
services 6,421 5,884 12,637 11,656
------- ------- ------- -------
Total telephone revenues 42,417 39,869 84,396 79,688
Wireless communications services 4,634 3,502 8,687 6,661
Telephone equipment sales and
services 1,728 2,011 3,466 3,880
------- ------- ------- -------
Total operating revenues 48,779 45,382 96,549 90,229
------- ------- ------- -------
Operating expenses:*
Depreciation 9,194 8,187 18,297 16,127
Other operating expenses 22,548 21,619 45,992 43,773
Taxes, other than payroll
and income 811 818 1,607 1,674
------- ------- ------- -------
Total operating expenses 32,553 30,624 65,896 61,574
------- ------- ------- -------
Operating income 16,226 14,758 30,653 28,655
------- ------- ------- -------
Non-operating income and expense:
Income from interest and other
investments 403 397 1,072 857
Interest expense and other
deductions 1,270 1,499 2,724 3,094
------- ------- ------- -------
Net non-operating expense 867 1,102 1,652 2,237
------- ------- ------- -------
Income before income taxes 15,359 13,656 29,001 26,418
Income taxes 5,874 5,262 11,102 10,171
------- ------- ------- -------
(Continued on following page)
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<PAGE>
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
STATEMENT OF EARNINGS (Cont'd)
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
(Dollars in Thousands)
Net income 9,485 8,394 17,899 16,247
Preferred dividends 56 56 112 112
------- ------- ------- -------
Earnings available for
common shares 9,429 8,338 17,787 16,135
======= ======= ======= =======
*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>
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
STATEMENT OF CASH FLOWS*
(UNAUDITED)
Six Months Ended
June 30, 1996 June 30, 1995
(Dollars in Thousands)
<CAPTION>
<S> <C> <C>
Cash flows from operating activities:
Net income $ 17,899 $ 16,247
-------- --------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 18,313 16,142
Deferred income taxes 2,163 31
Changes in assets and liabilities resulting
from operating activities:
Receivables 2,902 (2,460)
Other assets (403) (1,652)
Accounts payable and accrued expenses (6,543) (4,223)
Other liabilities 592 (291)
-------- --------
Total adjustments 17,024 7,547
-------- --------
Net cash provided by operating
activities 34,923 23,794
-------- --------
Cash flows from investing activities:
Expenditures for property and equipment (13,488) (21,799)
Net salvage on retirements 77 267
-------- --------
Net capital additions (13,411) (21,532)
Purchases and sales of investments and other
assets, net (275) (695)
Purchases of temporary investments (3,596) (284)
Maturities and sales of temporary investments 4,935 9,249
-------- --------
Net cash used for investing
activities (12,347) (13,262)
-------- --------
Cash flows used for financing activities:
Dividends to stockholders (13,112) (11,612)
Payments on note payable to bank (8,000) (5,000)
-------- --------
Net cash used in financing
activities (21,112) (16,612)
-------- --------
Net increase/(decrease) in cash and cash equivalents 1,464 (6,080)
Cash and cash equivalents, beginning of year 13,496 17,270
-------- --------
Cash and cash equivalents, end of quarter $14,960 $11,190
======= =======
(Continued on following page)
-5-
<PAGE>
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
STATEMENT OF CASH FLOWS (Cont'd)*
(UNAUDITED)
Six Months Ended
June 30, 1996 June 30, 1995
(Dollars in Thousands)
Supplemental disclosure of cash flow information:
Interest paid $ 2,293 $ 2,701
======= =======
Income taxes paid $ 7,705 $11,563
======= =======
* Certain reclassifications have been made to the historical consolidated
statements of cash flows to conform to the current presentation.
</TABLE>
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<PAGE>
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
NOTES TO FINANCIAL STATEMENTS
(1) Business
The Form 10-Q reflects the operations of The Lincoln Telephone and Telegraph
Company (the Company, herein sometimes called LT&T). The Company is a
wholly-owned subsidiary of Lincoln Telecommunications Company. The Company
provides local and long distance telephone service in 22 southeastern
counties of Nebraska. It further provides cellular telecommunications
services in the Lincoln Metropolitan Statistical Area (MSA) (which includes
all of Lancaster County in Nebraska) under the name of Lincoln Telephone
Cellular.
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. The Company has not received a bona fide
request to negotiate an agreement for resale, unbundled network elements or
interconnection at this time. In addition, the Company may apply to the
Nebraska Public Service Commission (NPSC) for a waiver or modification of
the requirements listed previously. The Company is currently examining the
opportunities for filing such a request. 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.
(2) Prior Year Accounting Changes
Financial Accounting Standard (FAS) 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 the Company in December
1995.
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<PAGE>
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) Cellular Activities
The Company's wireless services include cellular operations and wide area
paging services. The Company operates a cellular telecommunications system
in the Lincoln, Nebraska, MSA. In recent years, the Company has expanded
its wireless operations considerably. The Company also sells cellular
equipment.
The data summarized below reflects the Company's cellular operations.
Supplemental Data for Lincoln MSA Cellular Operations
Second Quarter
Lincoln MSA
Acquisition Date (1) April 23, 1987
Percent Ownership 100.0
POPs (potential subscribers) 1996 221,000
1995 221,000
1994 221,000
Customer Lines 1996 34,092
1995 24,556
1994 16,263
(1) The date the Company's operating license was granted in the
Lincoln MSA.
-8-
<PAGE>
(4) Restructuring Charges and Work Force Reduction
In 1995, the Company reduced its operator services 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.
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. 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 319 employees accepting this voluntary early retirement
offer, the Company recorded a reduction to its pension assets and
recognized a restructuring charge of $19.7 million at December 31, 1995.
Retirements under the program will become effective on or before December
31, 1997.
(5) Income Taxes
Total income tax expense for the three- and six-month periods ended June 30,
1996 and 1995 was $5,874,000 and $5,262,000; and $11,102,000 and
$10,171,000, 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 six-month periods
ended June 30, 1996 and 1995 consists of the following:
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<PAGE>
Six Months Ended June 30,
(Dollars in thousands) 1996 1995
- - ---------------------------------------------------------------
Current
U.S. Federal $ 8,002 $ 8,700
State and local 1,757 1,946
--------- ---------
Total current tax expense 9,759 10,646
Deferred
U.S. Federal 1,411 (72)
State and local 315 165
--------- ---------
Total deferred tax expense 1,726 93
Investment tax credits (383) (568)
--------- ---------
Total income tax expense $11,102 $10,171
========= =========
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:
Six Months Ended June 30,
(Dollars in thousands) 1996 1995
- - ---------------------------------------------------------------
Computed "expected" tax
expense $10,150 $ 9,246
Increase (reduction) in
income taxes resulting from:
State and local taxes, net
of Federal tax benefit 1,347 1,372
Non-taxable interest income (38) (56)
Amortization of regulatory
deferred charges 0 957
Amortization of regulatory
deferred liabilities 0 (895)
Amortization of investment
tax credits (383) (568)
Other, net 26 115
--------- ---------
Total income tax expense $11,102 $10,171
========= =========
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<PAGE>
The significant components of deferred income tax expense attributable to
income from continuing operations for the six-month periods ended June 30,
1996 and 1995 were the following:
Six Months Ended June 30,
(Dollars in thousands) 1996 1995
- - ---------------------------------------------------------------
Deferred tax expense $1,726 $ 31
Amortization of regulatory
deferred charges 0 957
Amortization of regulatory
deferred liabilities 0 (895)
-------- ---------
Total deferred tax expense $1,726 $ 93
======== =========
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at June 30,
1996 and December 31, 1995 are presented in the following:
(Dollars in thousands) June 30, 1996 December 31, 1995
- - ----------------------------------------------------------------------
Deferred tax assets:
Accumulated post-retirement
benefit cost $17,936 $17,493
Voluntary Early Retirement
Program 6,419 7,697
Other 2,290 2,686
--------- ---------
Total gross deferred tax
assets 26,645 27,876
Less valuation allowance -- --
--------- ---------
Net deferred tax assets $26,645 $27,876
========= =========
Deferred tax liabilities:
Plant and equipment,
principally due to
depreciation differences $32,142 $30,820
Other 1,434 1,825
--------- ---------
Total gross deferred tax
liabilities 33,576 32,645
--------- ---------
Net deferred tax
liabilities $ 6,931 $ 4,769
========= =========
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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 deemed necessary 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 balance sheet at December 31, 1995:
Accumulated Postretirement Benefit Obligation (Dollars in thousands):
Retirees $29,520
Active plan participants - fully eligible 11,551
Active plan participants - other 9,663
---------
50,734
Unrecognized prior service cost (1,633)
Unrecognized net loss (5,666)
---------
Accrued postretirement benefit costs $43,435
=========
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 six-month periods ended June
30, 1996 and 1995 include the following components:
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<PAGE>
Six Months Ended June 30,
(Dollars in thousands) 1996 1995
- - ---------------------------------------------------------------
Service cost $ 229 $ 179
Interest cost 1,980 1,931
Unrecognized prior service cost 54 5
Amortization of unrecognized loss 16 98
--------- ---------
Net periodic postretirement
benefit costs $ 2,279 $ 2,213
========= =========
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 health care cost trend 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 FAS 115, "Accounting for Certain
Investments in Debt and Equity Securities."
FAS 115 requires fair value reporting for certain investments in debt and
equity securities. Pursuant to FAS 115, the Company has classified all of
its investments as "available for sale" at June 30, 1996 and December 31,
1995. This information is summarized as follows:
June 30, 1996
- - ----------------------------------------------------------------------
Estimated
Amortized Gross Unrealized Market
(Dollars in thousands) Cost Gains Losses Value
- - ----------------------------------------------------------------------
Equity Securities $ 242 0 (2) 240
U.S. Government
obligations 1,711 0 (47) 1,664
U.S. Government agency
obligations 5,638 46 (93) 5,591
Corporate debt
securities 2,011 6 (131) 1,886
--------- ------- --------- --------
$ 9,602 52 (273) 9,381
========= ======= ========= ========
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<PAGE>
December 31, 1995
- - ----------------------------------------------------------------------
Estimated
Amortized Gross Unrealized Market
(Dollars in thousands) Cost Gains Losses Value
- - ----------------------------------------------------------------------
Equity Securities $ 1,222 36 (43) 1,215
U.S. Government
obligations 502 0 (3) 499
U.S. Government agency
obligations 7,253 120 (52) 7,321
Corporate debt
securities 2,548 30 (72) 2,506
--------- ------- --------- --------
$11,525 186 (170) 11,541
========= ======= ========= ========
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 balance sheet at June 30, 1996 and December 31, 1995.
The amortized cost and estimated market value of debt securities at June 30,
1996 and December 31, 1995, by contractual maturity, are shown in the
following tables. Equity securities are excluded from these tables.
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.
June 30, 1996
- - ----------------------------------------------------------------
Estimated
Amortized Market
(Dollars in thousands) Cost Value
- - ----------------------------------------------------------------
Due after three months through
five years $ 3,653 $ 3,585
Due after five years through
ten years 5,707 5,556
--------- ---------
$ 9,360 $ 9,141
========= =========
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<PAGE>
December 31, 1995
- - ----------------------------------------------------------------
Estimated
Amortized Market
(Dollars in thousands) Cost Value
- - ----------------------------------------------------------------
Due after three months through
five years $ 6,857 $ 6,953
Due after five years through
ten years 3,446 3,373
--------- ---------
$10,303 $10,326
========= =========
The gross realized gains and losses on the sale of securities were
insignificant to the financial statements at June 30, 1996 and December 31,
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 telephone plant for 1996 are projected to be
$42,575,000. During the six-month period ended June 30, 1996, cash provided
by operating activities, less dividends paid, exceeded capital additions.
No long-term borrowings are anticipated for the balance of 1996.
Results of Operations
Revenues
Second Quarter 1996 Six Months 1996
Increase (Decrease) Increase (Decrease)
Over Second Over Six
Quarter 1995 Months 1995
------------------- -------------------
Operating revenues:
Telephone revenues:
Local network services 4.8% 4.9%
Access services 11.7% 9.1%
Long distance services (10.5%) (6.0%)
Other wireline communications
services 9.1% 8.4%
Total telephone revenues 6.4% 5.9%
Wireless communications services 32.3% 30.4%
Telephone equipment sales
and services (14.1%) (10.7%)
Total operating revenues 7.5% 7.0%
All comparisons hereinafter made are of the second quarter and six-month
periods for 1996 with the same periods in 1995. The adjustments included
are all of a normal recurring nature except when noted as extraordinary or
nonrecurring.
Local network services revenue increased $852,000 (4.8%) and $1,742,000
(4.9%), respectively. Basic local services revenue increased $640,000
(5.0%) and $1,260,000 (4.9%) led by growth in business and Centrex services
revenue for the three- and six-month periods. Residential and business
telephone access lines in service grew by 8,172 (3.3%) from June 30, 1995.
Expanded area services revenue increased $113,000 (6.0%) and $395,000
(10.8%) due to increased usage. Local private line services increased
$113,000 (28.7%) and $155,000 (18.5%), primarily due to increased demand for
frame relay service.
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<PAGE>
Access services revenue increased $1,510,000 (11.7%) and $2,382,000 (9.1%).
Overall minutes of use increased by 6.6% and 7.7%, respectively.
Long distance services revenue decreased $351,000 (10.5%) and $397,000
(6.0%), respectively, primarily due to the expiration of the AT&T operator
services contract in December 1995.
Other wireline communications services revenues, consisting of directory
advertising and sales, carrier billing and collections, data communications,
and miscellaneous items, increased $537,000 (9.1%) and $981,000 (8.4%) for
the three- and six-month periods.
Wireless communications services revenues increased $1,132,000 (32.3%) and
$2,026,000 (30.4%), respectively, and the number of cellular customer lines
increased by 9,536 (38.8%).
Telephone equipment sales and service revenue decreased $283,000 (14.1%) and
$414,000 (10.7%), respectively, due to the larger discounts provided to
customers on cellular service contracts.
Total operating revenues increased $3,397,000 (7.5%) and $6,320,000 (7.0%)
for the three- and six-month periods ended June 30, 1996.
Operating Expenses
Second Quarter 1996 Six Months 1996
Increase (Decrease) Increase (Decrease)
Over Second Over Six
Quarter 1995 Months 1995
------------------- -------------------
Depreciation 12.3% 13.5%
Other operating expenses 4.3% 5.1%
Taxes, other than payroll
and income (.9%) (4.0%)
Total operating expenses 6.3% 7.0%
All comparisons hereinafter made are of the second quarter and six-month
periods for 1996 with the same periods in 1995. The adjustments included
are all of a normal recurring nature except when noted as extraordinary or
nonrecurring.
Depreciation increased $1,007,000 (12.3%) and $2,170,000 (13.5%) for the
three- and six-month periods ended June 30, 1996. As a result of
discontinuance of FAS 71 in December 1995, depreciation expense for the
Company is now based on estimated economic useful lives rather than those
prescribed by regulatory commissions, causing an increase in depreciation of
$673,000 and $1,341,000, respectively.
-17-
<PAGE>
Total operating expenses increased $1,929,000 (6.3%) and $4,322,000 (7.0%)
for the three- and six-month periods.
Non-Operating Income (Expense)
Second Quarter 1996 Six Months 1996
Increase (Decrease) Increase (Decrease)
Over Second Over Six
Quarter 1995 Months 1995
------------------- -------------------
Income from interest and
other investments 1.5% 25.1%
Interest expense and other
deductions (15.3%) (12.0%)
Net non-operating expenses (21.3%) (26.2%)
Income from interest and other investments increased $6,000 (1.5%) and
$215,000 (25.1%), respectively.
Interest expense and other deductions decreased $229,000 (15.3%) and
$370,000 (12.0%) for the second quarter and six-month period when compared
to 1995.
Income Taxes
Income taxes increased $612,000 (11.6%) and $931,000 (9.2%) for the three-
and six-month periods. The increase is primarily due to increased income.
For a detailed explanation of the increase, see the first table under Item
I, Part (5), Income Taxes.
-18-
<PAGE>
PART II - OTHER INFORMATION
Item 1-5 - Not applicable
Item 6 - a) Not applicable
b) During the quarter ended June 30, 1996, the Registrant did
not file a Form 8-K.
-19-
<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.
The Lincoln Telephone and Telegraph Company
(Registrant)
August 14, 1996 /s/ Robert L. Tyler
Date..................... ......................................
(Signature)
Robert L. Tyler, Senior Vice President-
Chief Financial Officer
August 14, 1996 /s/ Michael J. Tavlin
Date..................... ......................................
(Signature)
Michael J. Tavlin, Vice President-
Treasurer
-20-
<PAGE>
Form 10-Q
Exhibit Index
Exhibit Title Page No.
3(i) The Lincoln Telephone and Telegraph Company Certificate of
Incorporation and Amendment thereto, effective September 3, 1996.
27 Financial Data Schedule
-21-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000059584
<NAME> LINCOLN TELEPHONE & TELEGRAPH COMPANY
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 14960
<SECURITIES> 10034
<RECEIVABLES> 27163
<ALLOWANCES> 187
<INVENTORY> 4974
<CURRENT-ASSETS> 57174
<PP&E> 480585
<DEPRECIATION> 262593
<TOTAL-ASSETS> 286535
<CURRENT-LIABILITIES> 52176
<BONDS> 44000
0
4499
<COMMON> 3
<OTHER-SE> 124927
<TOTAL-LIABILITY-AND-EQUITY> 286535
<SALES> 3467
<TOTAL-REVENUES> 93975
<CGS> 1655
<TOTAL-COSTS> 67450
<OTHER-EXPENSES> 1652
<LOSS-PROVISION> 32
<INTEREST-EXPENSE> 2724
<INCOME-PRETAX> 24873
<INCOME-TAX> 11102
<INCOME-CONTINUING> 13771
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13658
<EPS-PRIMARY> 13.658
<EPS-DILUTED> 13.658
<PAGE>
</TABLE>
CERTIFICATE OF INCORPORATION
OF
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
(As amended through April 24, 1985)
FIRST. The name of this corporation is
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
SECOND. Its principal office in the State of Delaware is located at
No. 7 West 10th Street, in the City of Wilmington, County of New Castle.
The name and address of its resident agent is the Corporation Trust Company
of America, No. 7 West 10th Street, Wilmington, Delaware.
It may also have a general office in such other cities and states as
the Board of Directors may from time to time elect.
THIRD. The nature of the business, or objects or purposes to be
transacted, promoted or carried on are:
(a) To own, engage in, operate and carry on a general communications
business; to buy, own, hold, acquire, lease, sell, exchange, operate and
manage telephone exchanges, properties, rural and urban lines, and
telegraph, data, video, community antenna, closed circuit, microwave, radio
and electronic systems, properties and businesses, or any interest therein;
and to buy, own, hold, acquire, sell, and exchange stocks, bonds,
debentures, notes, contracts and other securities of corporations engaged
in the ownership or operation of any of the foregoing exchanges, lines,
systems, properties and businesses.
(b) To purchase and acquire securities, assets and properties of every
kind and description as judicial, judiciary, trustee's, pledgee's,
mortgagee's, or liquidating or public or private sales, and to do a general
commission and brokerage business.
(c) To obtain the grant of, purchase, lease, or otherwise acquire any
concessions, rights, options, patents, privileges, lands, rights of way,
sites, properties, undertakings or businesses, or any right, option, or
contract in relation thereto, and to perform, carry out and fulfill the
terms and conditions thereof, and to carry the same into effect and to
develop, maintain, lease, sell, transfer, dispose of and otherwise deal
with the same.
(d) From time to time to apply for, purchase or acquire by assignment,
transfer or otherwise, and to exercise, carry out and enjoy any license,
power, authority, franchise, ordinance, order, right or privilege which any
government or authority, supreme, municipal or local or any corporation or
other public body shall enact, make or grant.
(e) To manufacture, purchase or otherwise acquire, own, mortgage,
pledge, sell, assign and transfer, or otherwise dispose of, to invest,
trade, deal in and deal with, goods, wares and merchandise and real and
personal property of every class and description.
(f) To acquire, hold, use, sell, assign, lease, grant licenses in
respect of, mortgage or otherwise dispose of letters patent of the United
States or any foreign country, patent rights, licenses and privileges,
inventions, improvements and processes, copyrights, trade marks and trade
names relating to or useful in connection with any business of this
corporation.
(g) To issue bonds, debentures, or obligations of this corporation
from time to time for any of the objects or purposes of the corporation and
to secure the same by mortgage, pledge, deed of trust; or otherwise.
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(h) To purchase, hold, sell and transfer the shares of its own capital
stock; provided it shall not use its funds or property for the purchase of
its own shares of capital stock when such use would cause any impairment of
its capital; and provided further that shares of its own capital stock
belonging to it shall not be voted upon directly or indirectly.
(i) To have one or more offices, to carry on all or any of its
operations and business and without restriction or limit as to amount, to
purchase or otherwise acquire, hold, own, mortgage, sell, convey or
otherwise dispose of real and personal property of every class and
description in any of the States, Districts, Territories, or Colonies of
the United States, and in any and all foreign countries, subject to all the
laws of such States, Districts, Territories, Colonies or Countries.
(j) In general, to carry on any other business in connection with the
foregoing, whether manufacturing or otherwise, and to have and exercise all
the powers conferred by the laws of Delaware upon corporations formed under
the Act hereinafter referred to, and to do any or all of the things
hereinbefore set forth to the same extent as natural persons might or could
do.
Notwithstanding anything herein to the contrary, nothing herein
contained shall be deemed to authorize this corporation to engage in or
conduct in the State of Illinois, or elsewhere, an agency and loan business
as defined by the laws of the State of Illinois, or to acquire the shares
of stock of a building corporation or of an agency and loan corporation
organized or doing business in the State of Illinois.
The foregoing clauses shall be construed both as objects and powers,
and it is hereby expressly provided that the foregoing enumeration of
specific powers shall not be held to limit or restrict in any manner the
powers of this corporation.
FOURTH. The total number of shares of stock which the corporation
shall have authority to issue is two hundred sixty thousand (260,000)
shares, of a total par value in the amount of twenty-five million
thirty-one thousand two hundred fifty ($25,031,250); of which two hundred
fifty thousand (250,000) shares of the par value of one hundred dollars
($100) each, amounting in the aggregate to twenty-five million dollars
($25,000,000) shall be known as preferred stock; and the remaining ten
thousand (10,000) shares of the par value of three dollars and twelve and
one-half cents ($3.125) each, amounting in the aggregate to thirty-one
thousand two hundred fifty dollars ($31,250.00) shall be known as common
stock. Each issued share of common stock of this corporation of the par
value of six dollars and twenty-five cents ($6.25) per share shall be and
become two shares of common stock of the par value of three dollars and
twelve and one-half cents ($3.125) per share. Each outstanding common
stock certificate of this corporation which heretofore represented one or
more shares of said common stock of the par value of six dollars and
twenty-five cents ($6.25) per share shall hereafter represent the same
number of shares of common stock of the par value of three dollars and
twelve and one-half cents ($3.125) per share, and the corporation shall
issue to the holder of record of each such stock certificate as of the time
this amendment to the Certificate of Incorporation becomes effective, or on
the order of such holder, an additional stock certificate or certificates
representing one share of common stock of the par value of three dollars
and twelve and one-half cents ($3.125) per share for each share of the
common stock of the par value of six dollars and twenty-five cents ($6.25)
per share heretofore represented by such issued stock certificate.
No shares of preferred stock shall be issued unless the net earnings,
after income taxes but before interest charges, in twelve (12) consecutive
months of the immediately preceding fifteen (15) months, equals at least
one and one-half times (1 1/2) the annual interest charges plus pro forma
annual dividend requirements of the preferred stock after issuance of the
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additional shares. In addition, no shares of preferred stock shall be
issued unless equity capitalization ranking junior to the existing class or
classes of preferred stock amounts to no less than twenty-five percent
(25%) of total capitalization after the issuance of the additional
preferred. Subject to these limitations, the shares of preferred stock may
be issued from time to time in one or more series, and there is hereby
designated a series known as "5% PREFERRED" which shall consist of
forty-five thousand (45,000) shares. Any share of preferred stock from
time to time available for issuance or reissuance may be issued from time
to time by the Board of Directors, and authority is hereby granted to and
conferred upon the Board of Directors to issue any of such shares, either
by enlarging the series known as "5% PREFERRED" or, if so determined by the
Board of Directors, in creating one or more other series, each such other
series to have such distinctive designation or title as may be fixed by the
Board of Directors prior to the issuance of any shares thereof. The
different series of preferred stock may differ one from the other and each
from any and all other series, as may be determined by the Board of
Directors, in any or all of the following, but in no other respects:
(a) the rate per share per annum at which dividends are to be paid
thereon, hereinafter referred to as "the fixed dividend rate"; provided,
however, that the fixed dividend rate is hereby declared to be, and shall
be, Five Dollars ($5.00) per share per annum for the series of
"5% PREFERRED" stock;
(b) the amount per share payable as a premium with respect to the
shares of preferred stock of any series in case of redemption thereof,
which amount is hereinafter referred to as the "fixed redemption premium";
provided, however, that the fixed redemption premium is hereby declared to
be, and shall be, Five Dollars ($5.00) per share with respect to shares of
the series of "5% PREFERRED" stock; and the time or times for redemption of
any preferred stock. The preferred stock shall not be entitled to receive
any premium in the event of voluntary or involuntary liquidation,
dissolution or winding up of the corporation;
(c) the sinking-fund or other provisions which may be established by
the Board of Directors for the redemption or retirement of preferred stock
of any series;
(d) the right, if any, of the holders of the preferred stock of any
series, to convert the same into preferred stock of other series or into
other classes of stock, and the terms and conditions of such conversion.
The description and terms of the preferred stock of each series in respect
of the foregoing particulars (except as herein fixed in respect of the
series of "5% PREFERRED" stock) shall be fixed and determined by the Board
of Directors at or prior to the time of the authorization of the issue of
the original shares of each such series.
The description and terms of the preferred stock of each series shall
be set forth in full or shall be summarized in the certificates therefor.
All shares of preferred stock shall be of equal rank and shall be identical
in all respects; except in respect of the particulars that may be fixed by
the Board of Directors as above provided, and all shares of each series
shall be identical in all respects, except with respect to the date upon
which dividends shall become cumulative.
A statement of the designations and powers, preferences and rights,
and the qualifications, limitations or restrictions in respect of the
classes of stock of the corporation is as follows:
PREFERRED STOCK
(1) DIVIDENDS. The holders of the preferred stock of each series
shall be entitled to receive, when and as declared payable by the board of
directors of the corporation, out of the annual net profits or net assets
in excess of capital of this corporation, as determined pursuant to the
laws of the State of Delaware, dividends at but not exceeding the fixed
<PAGE>
dividend rate for such series, payable quarterly, semi-annually, or
annually as the board of directors may determine, before any dividends
shall be paid upon or set apart for the common stock; and such dividends on
the preferred stock shall be cumulative, so that if in any dividend period
or periods, full dividends upon the outstanding preferred stock at the
fixed dividend rate or rates therefor shall not have been paid, the
deficiency (without interest) shall be paid or declared and set apart for
payment before any dividends shall be paid upon or set apart for the common
stock. Dividends on all shares of preferred stock of each series shall
commence to accrue and be cumulative on outstanding shares from the date of
issuance, but in the event of the issue of additional shares of the
preferred stock of such series subsequently to the date of the first issue
of shares of such series, all dividends paid on the preferred stock of any
series prior to the issue of such additional shares, and all dividends
declared payable to holders of record of such preferred stock of such
series of a date prior to such issue, shall be deemed to have been paid in
respect to the additional shares so issued. Any dividends paid upon the
preferred stock in an amount less than accumulated dividend or dividends in
arrears upon all preferred stock outstanding shall, if more than one series
be outstanding, be divided between the different series in proportion to
the aggregate amounts which would be distributed to the preferred stock of
each series if full cumulative dividends were declared and paid thereon.
The holders of the preferred stock shall not be entitled to receive any
dividends thereon other than the dividends provided in this paragraph.
(2) PREFERENCES ON LIQUIDATION. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of this corporation, the
holders of the preferred stock of each series shall be entitled to receive
for each share thereof an amount equal to One Hundred Dollars ($100.00)
together in all cases with all dividends accrued, or in arrears thereon,
before any distribution of the assets shall be made to the holders of the
common stock; but the holders of the preferred stock shall be entitled to
no further participation in such distribution. If upon such liquidation,
dissolution or winding up of the corporation, the assets distributable
among the holders of the preferred stock shall be insufficient to permit
the payment of the full amount aforesaid, then the entire available assets
of this corporation shall be distributed among the holders of the preferred
stock then outstanding ratably in proportion to the amounts to which they
are respectively entitled. After the preferred stock has received One
Hundred Dollars ($100.00) per share together with all dividends accrued or
in arrears thereon, any remaining assets shall be distributed amount the
holders of the common stock then outstanding.
(3) REDEMPTION. This corporation may at its option at any time or
from time to time redeem the whole or any part of the preferred stock, or
of any series thereof, at a price per share equal to One Hundred Dollars
($100.00), plus the fixed redemption premium therefor, together with the
amount of any dividends accrued or in arrears thereon. Notice of any
proposed redemption of preferred stock shall be given by this corporation
by mailing a copy of such notice at least thirty (30) days prior to the
date fixed for such redemption, to the holders of record of the preferred
stock or of any series thereof to be redeemed, at their respective
addresses appearing on the books of this corporation, and also, if so
provided in the certificates for the preferred stock to be redeemed or in
the by-laws of this corporation, by publication in such manner as shall
have been so provided. Any such redemption of part of the preferred stock
shall be in such amount, at such place and by such method, as shall from
time to time be provided by the by-laws of this corporation or be
determined by resolution of its board of directors. From and after the
date fixed in any such notice as the date of redemption, unless default
shall be made by this corporation in providing monies at the time and place
<PAGE>
specified for the payment of the redemption price, pursuant to said notice,
all dividends on the preferred stock thereby called for redemption shall
cease to accrue; and from and after the date so fixed, all rights of the
holders of the shares of preferred stock so called for redemption as
stockholders of this corporation, except only the right to receive the
redemption price when due, shall cease, and for all other purposes said
shares shall be deemed no longer to be outstanding. Right to redeem said
stock and the method of selection to be employed in the event less than all
of said stock is called, is vested solely in the board of directors of the
corporation. The preferred stock shall not be entitled to receive any
premium in the event of voluntary or involuntary liquidation, dissolution
or winding up of the corporation.
(4) VOTING RIGHTS. The holders of the preferred stock shall not be
entitled to vote, nor to any notice of stockholders' meetings except as
provided by the laws of Delaware, unless and until dividends on said stock
are in arrears for four dividend periods, and said stock shall be entitled
to one vote per share so long as said dividends are unpaid. Upon the
payment of said dividends the right of the holders of said preferred stock
to vote and to notice of meetings shall thereupon cease; but subject always
to the same provisions for the vesting of such voting power in the holders
of the preferred stock in case of any similar defaults in the payment of
dividends upon the preferred stock for four dividend periods.
COMMON STOCK
(1) DIVIDENDS. The holders of the common stock will receive such
dividends, if, when and as declared by the board of directors of the
corporation, out of any annual net profits or net assets in excess of
capital of this corporation as determined pursuant to the laws of the State
of Delaware, remaining after payment or provision for payment of all
accumulated and current dividends on the preferred stock of the
corporation.
(2) PREFERENCES ON LIQUIDATION. In case of any liquidation,
dissolution or winding up of the affairs of the corporation, whether
voluntary or involuntary, and after the holders of the preferred stock
shall have received the par value of their stock, plus all accrued, unpaid,
or accumulated dividends thereon, then the holders of the common stock
shall be entitled to receive the remaining assets of the corporation or the
proceeds thereof.
(3) VOTING RIGHTS. Each share of common stock shall be entitled to
one vote at all meetings of the stockholders.
FIFTH. The amount of capital with which this corporation will
commence business is ten (10) shares of "Class B" Common stock, which
shares are without nominal or par value.
SIXTH. The names and places of residence of the original subscribers
to the capital stock and the number of shares subscribed to by each are as
follows:
NO. OF SHARES
NAME RESIDENCE "CLASS B" COMMON
A. L. Miller Wilmington, Delaware 8
T. L. Fray Wilmington, Delaware 1
A. V. Lane Wilmington, Delaware 1
SEVENTH. The affairs of this corporation shall be managed by a Board
of Directors which shall have and shall exercise all the powers of the
corporation. The number of directors, the manner of their election and the
terms for which elected shall be fixed and may be altered from time to time
as may be provided in the By-laws. Directors need not be stockholders in
the corporation.
EIGHTH. This corporation shall have perpetual existence.
NINTH. The private property of the stockholders shall not be subject
to the payment of the corporate debts to any extent whatever.
<PAGE>
TENTH. No holder of shares of stock of the corporation of any class
or holder of any bond, debenture or other security convertible into shares
of stock of the corporation of any class shall have any pre-emptive right
to subscribe for, purchase or otherwise acquire shares of stock of the
corporation of any class, whether now or hereafter authorized, or bonds,
debentures or other securities, whether or not convertible into shares of
stock of the corporation of any class.
ELEVENTH. In furtherance, and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized:
(l) To make and alter the By-Laws of this corporation; to fix the
amounts to be reserved as working capital, reserves and surplus over and
above its capital stock paid in; to authorize and cause to be executed
mortgages and liens upon the real and personal property of this
corporation.
(2) From time to time to determine whether and to what extent, and at
what time and places, and under what conditions and regulations, the
accounts and books of this corporation (other than the stock ledger) or any
of them, shall be open to inspection of stockholders; and no stockholder
shall have any right of inspecting any account, book or document of this
corporation except as conferred by statute, unless authorized by a
resolution of the stockholders or directors.
(3) By resolution or resolutions, passed by a majority of the whole
board to designate one or more committees, each committee to consist of two
or more of the directors of the corporation, which, to the extent provided
in said resolution or resolutions, or in the By-Laws of the corporation,
shall have and may exercise the powers of the Board of Directors in the
management of the business and affairs of the corporation, and may have
power to authorize the seal of the corporation to be affixed to all papers
which may require it. Such committee or committees shall have such name or
names as may be stated in the By-Laws of the corporation or as may be
determined from time to time by resolution adopted by the Board of
Directors.
(4) Pursuant to the affirmative vote of the holders of at least a
majority of the stock issued and outstanding, having voting power, given at
a stockholders' meeting duly called for that purpose, or when authorized by
the written consent of the holders of a majority of the stock issued and
outstanding, having voting power, the Board of Directors shall have power
and authority at any meeting to sell, lease or exchange all of the property
and assets of this corporation, including its good will and its corporate
franchises, upon such terms and conditions as its Board of Directors may
deem expedient and for the best interests of the corporation.
(5) This corporation may in its By-Laws confer powers upon its
directors in addition to the foregoing, and in addition to the powers and
authorities expressly conferred upon them by statute.
(6) Both the voting stockholders and directors shall have power, if
the By-Laws so provide, to hold their meetings, and to have one or more
offices within or without the State of Delaware, and to keep the books of
this corporation (subject to the provisions of the statutes) outside the
State of Delaware at such places as may from time to time be designated by
the Board of Directors.
TWELFTH. This corporation reserves the right to amend, alter, change
or repeal any provision contained in this certificate of incorporation, in
the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein granted are subject to this reservation.
WE, THE UNDERSIGNED, being each of the original subscribers to the
capital stock hereinbefore named, for the purpose of forming a corporation
to do business both within and without the State of Delaware, and in
pursuance of the General Corporation Law of the State of Delaware, being
<PAGE>
Chapter 65 of the Revised Code of Delaware, and the acts amendatory thereof
and supplemental thereto, do make and file this certificate, hereby
declaring and certifying that the facts herein stated are true, and do
respectively agree to take the number of shares of the stock hereinbefore
set forth, and accordingly have hereunto set our hands and seals this 4th
day of May, 1928.
In the presence of: A. L. Miller (SEAL)
Herbert E. Latter T. L. Fray (SEAL)
A. V. Lane (SEAL)
STATE OF DELAWARE )
)SS.
COUNTY OF NEW CASTLE)
BE IT REMEMBERED, that on this 4th day of May, 1928, personally came
before me, Herbert E. Latter, a Notary Public in and for the State of
Delaware, New Castle County, A. L. Miller, T. L. Fray and A. V. Lane,
parties to the foregoing certificate of incorporation, known to me
personally to be such and severally acknowledged the said certificate to be
the act and deed of the signers respectively and that the facts therein
stated are truly set forth.
GIVEN under my hand and seal of office the day and year aforesaid.
Herbert E. Latter
Notary Public
Herbert E. Latter
Notary Public
Appointed Feb. 24, 1927
State of Delaware
Term Two Years
<PAGE>
ARTICLES OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
Pursuant to Section 21-20,121 of the Business Corporation Act, the
undersigned officer of The Lincoln Telephone and Telegraph Company, a
Delaware corporation domesticated to the State of Nebraska (the
"Corporation"), states as follows:
1. The name of the Corporation is The Lincoln Telephone and
Telegraph Company.
2. The First Section of the Certificate of Incorporation of the
Corporation is amended, as of the effective time and date set forth below,
to delete the original text in its entirety and insert in its place the
following First Section (the "Amendment"):
FIRST. The name of the corporation is
Aliant Communications Co.
3. The only class of shares of the Corporation entitled to vote on
the approval of the Amendment is Common Stock, of which one thousand
(1,000) shares are issued and outstanding and entitled to vote on the
approval of the Amendment. By written consent of the Sole Common
Stockholder of the Corporation dated July 18, 1996, a total of one thousand
(1,000) of such shares were voted in favor of, and no shares were voted
against, approval of the Amendment. The foregoing affirmative vote is
sufficient to approve the Amendment in accordance with the Act.
4. The effective time and date of the Amendment shall be 12:01
a.m., September 3, 1996.
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to be executed as of the 18th day of July, 1996.
The Lincoln Telephone and Telegraph Company
/s/ Michael J. Tavlin
By: ..................................
(Signature)
Michael J. Tavlin, Vice President-
Treasurer and Secretary
