<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 September 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
---------------------------------------
Aliant Communications Co.
(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 September 30, 1996
$3.125 par value 1,000 Shares
<PAGE>
PART I - FINANCIAL INFORMATION
ALIANT COMMUNICATIONS CO.
The following financial statements of Aliant Communications Co. 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 Reports on
Form 10-Q, which are incorporated by reference. These prior reports are
filed under the former corporate name: The Lincoln Telephone and Telegraph
Company.
-1-
<PAGE>
Item 1 - Financial Statements
<TABLE>
ALIANT COMMUNICATIONS CO.
BALANCE SHEETS
Sept.30, 1996 Dec. 31, 1995
(Unaudited) (Audited)
(Dollars in Thousands)
<CAPTION>
ASSETS
<S> <C> <C>
Current assets $ 61,005 $ 61,216
Property and equipment less accumulated
depreciation and amortization 216,183 222,879
Investments and other assets 758 339
Deferred charges 11,433 9,180
--------- ---------
Total assets $ 289,379 $ 293,614
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Notes payable to banks $ -- $ 8,000
Accounts payable and accrued liabilities 53,379 57,242
--------- ---------
Total current liabilities 53,379 65,242
Deferred credits and other long-term liabilities 60,131 59,729
Long-term debt 44,000 44,000
Preferred stock, 5%, redeemable 4,499 4,499
Stockholder's equity 127,370 120,144
--------- ---------
Total liabilities and stockholder's equity $ 289,379 $ 293,614
========= =========
</TABLE>
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<PAGE>
<TABLE>
ALIANT COMMUNICATIONS CO.
STATEMENTS OF EARNINGS
(UNAUDITED)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1996 1995 1996 1995
(Dollars in Thousands)
<CAPTION>
<S> <C> <C> <C> <C>
Operating revenues:*
Telephone revenues:
Local network services $18,758 $18,026 $55,822 $53,222
Access services 13,857 14,073 42,302 40,136
Long distance services 3,034 3,268 9,284 9,926
Other wireline communications
services 6,113 5,988 18,750 17,759
------- ------- ------- -------
Total telephone revenues 41,762 41,355 126,158 121,043
Wireless communications services 4,896 3,626 13,583 10,287
Telephone equipment sales and
services 1,747 1,720 5,213 5,600
------- ------- ------- -------
Total operating revenues 48,405 46,701 144,954 136,930
------- ------- ------- -------
Operating expenses:*
Depreciation 9,271 8,361 27,568 24,488
Other operating expenses 22,677 21,209 68,669 64,982
Restructuring charge -- 1,552 -- 1,552
Taxes, other than payroll
and income 918 844 2,525 2,518
------- ------- ------- -------
Total operating expenses 32,866 31,966 98,762 93,540
------- ------- ------- -------
Operating income 15,539 14,735 46,192 43,390
------- ------- ------- -------
Non-operating income and expense:
Income from interest and other
investments 303 345 1,375 1,202
Interest expense and other
deductions 1,246 1,435 3,970 4,529
------- ------- ------- -------
(Continued on following page)
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<PAGE>
ALIANT COMMUNICATIONS CO.
STATEMENTS OF EARNINGS (Cont'd)
(UNAUDITED)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1996 1995 1996 1995
(Dollars in Thousands)
Net non-operating expense 943 1,090 2,595 3,327
------- ------- ------- -------
Income before income taxes 14,596 13,645 43,597 40,063
Income taxes 5,600 5,266 16,702 15,437
------- ------- ------- -------
Net income 8,996 8,379 26,895 24,626
Preferred dividends 57 57 169 169
------- ------- ------- -------
Earnings available
for common shares 8,939 8,322 26,726 24,457
======= ======= ======= =======
*Certain reclassifications have been made to the historical consolidated
statements of earnings to conform to the current presentation.
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<PAGE>
</TABLE>
<TABLE>
ALIANT COMMUNICATIONS CO.
STATEMENTS OF CASH FLOWS*
(UNAUDITED)
Nine Months Ended
Sept. 30, 1996 Sept. 30, 1995
(Dollars in Thousands)
<CAPTION>
<S> <C> <C>
Cash flows from operating activities:
Net income $ 26,895 $ 24,626
-------- --------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 27,591 24,512
Restructuring charge -- 1,552
Deferred income taxes 782 (329)
Changes in assets and liabilities resulting
from operating activities:
Receivables 1,427 (4,116)
Other assets (3,552) (2,210)
Accounts payable and accrued expenses (4,322) (2,866)
Other liabilities 79 (1,170)
-------- --------
Total adjustments 22,005 15,373
-------- --------
Net cash provided by operating
activities 48,900 39,999
-------- --------
Cash flows from investing activities:
Expenditures for property and equipment (20,789) (27,837)
Net salvage on retirements (83) 2,075
-------- --------
Net capital additions (20,872) (25,762)
Purchases and sales of investments and other
assets, net (421) (1,041)
Purchases of temporary investments (10,098) (1,802)
Maturities and sales of temporary investments 14,358 11,469
-------- --------
Net cash used for investing
activities (17,033) (17,136)
-------- --------
Cash flows used for financing activities:
Dividends to stockholders (19,669) (17,669)
Payments on note payable to bank (8,000) (8,000)
-------- --------
(Continued on following page)
-5-
<PAGE>
ALIANT COMMUNICATIONS CO.
STATEMENTS OF CASH FLOWS (Cont'd)*
(UNAUDITED)
Nine Months Ended
Sept. 30, 1996 Sept. 30, 1995
(Dollars in Thousands) Net cash used in financing
activities (27,669) (25,669)
-------- --------
Net increase (decrease) in cash and cash equivalents 4,198 (2,806)
Cash and cash equivalents, beginning of year 13,496 17,270
-------- --------
Cash and cash equivalents, end of quarter $17,694 $14,464
======= =======
Supplemental disclosure of cash flow information:
Interest paid $ 2,307 $ 2,974
======= =======
Income taxes paid $16,368 $17,315
======= =======
* Certain reclassifications have been made to the historical consolidated
statements of cash flows to conform to the current presentation.
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<PAGE>
ALIANT COMMUNICATIONS CO.
NOTES TO FINANCIAL STATEMENTS
(1) Business
The Form 10-Q reflects the operations of Aliant Communications Co. (the
"Company", herein sometimes called "Telco"). The Company is a wholly-owned
subsidiary of Aliant Communications Inc. 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 Aliant Cellular-Lincoln (Lincoln MSA).
The Telecommunications Act of 1996 (the "Act") 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 LECs to negotiate interconnection agreements
with companies who want connection to LEC networks. The Federal
Communications Commission (FCC) released an Order to implement the
interconnection portion of the Act on August 8, 1996 (the "Interconnection
Order"). The Interconnection Order contains pricing proxies which are
unfavorable to LECs. Several LECs filed petitions to review the
Interconnection Order with the Federal Courts and requested that the
pricing provisions of the Interconnection Order be stayed. On October 15,
1996, the Eighth Circuit Court of Appeals entered an Order Granting Stay
Pending Judicial Review which did stay the effectiveness of the pricing and
the so-called "pick and choose" provisions of the Interconnection Order.
The FCC and certain telecommunications companies requested review of the
Eighth Circuit's Stay Order by the United States Supreme Court; however,
the Supreme Court declined to make such a review. The Telco has also filed
a Petition for Review of the Interconnection Order, and such Petition has
been consolidated with the other cases relating to the Interconnection
Order which are pending before the Eighth Circuit.
The Telco has not received a bona fide request to negotiate an agreement
for resale, unbundled network elements or interconnection at this time. In
addition, the Telco may apply to the Nebraska Public Service Commission
(NPSC) for a waiver or modification of such requirements pursuant to
Section 251(f)2 of the Act. The Telco is currently examining such a
request. The Act also provides new business opportunities for the Company,
such as entry into the cable television market, and entry into additional
geographic markets with either a full range of services or selected
services to niche markets.
-7-
<PAGE>
On November 8, 1996, the Telco announced a 10% increase to residential
basic local service rates which will become effective March 23, 1997,
unless an adequate number of subscribers petition the NPSC to conduct a
hearing to review such increase. The Telco has not increased such rates
since 1991. The residential basic local exchange service increase will be
offset by an 8% to 10% reduction in the Telco's long distance rates within
its 22 county service area in southeast Nebraska, and by a reduction to
intrastate access service rates of approximately 16%. The passage of the
Act, which encourages local exchange competition, requires rate adjustments
by the Telco to bring prices for residential basic local exchange service
closer to actual costs. Because the Telco's rates for residential basic
local exchange service have historically been priced below costs, rate
adjustments are needed to more accurately reflect costs. Taken as a whole,
the projected annual revenue impact to the Company is expected to be a
reduction of approximately $1.1 million in operating revenues.
(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 regu-
lators 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.
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.
-8-
<PAGE>
The data summarized below reflects the Company's cellular operations.
Supplemental Data for Lincoln MSA Cellular Operations
Third 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 36,594
1995 26,061
1994 17,825
(1) The date the Company's operating license was granted in the
Lincoln MSA.
(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 are being phased in and will become fully
effective by December 31, 1997.
-9-
<PAGE>
(5) Income Taxes
Total income tax expense for the three- and nine-month periods ended
September 30, 1996 and 1995 was $5,600,000 and $5,266,000; and $16,702,000
and $15,437,000, respectively, and was comprised solely of income taxes on
income from continuing operations. Income tax expense attributable to
income from continuing operations for the nine-month periods ended
September 30, 1996 and 1995 consists of the following:
Nine Months Ended September 30,
(Dollars in thousands) 1996 1995
- - ------------------------------------------------------------------
Current
U.S. Federal $13,509 $13,507
State and local 2,986 3,017
--------- ---------
Total current tax expense 16,495 16,524
Deferred
U.S. Federal 639 (417)
State and local 143 181
--------- ---------
Total deferred tax expense 782 (236)
Investment tax credits (575) (851)
--------- ---------
Total income tax expense $16,702 $15,437
========= =========
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:
Nine Months Ended September 30,
(Dollars in thousands) 1996 1995
- - ------------------------------------------------------------------
Computed "expected" tax
expense $15,259 $14,022
Increase (reduction) in
income taxes resulting from:
State and local taxes, net
of Federal tax benefit 2,034 2,079
Non-taxable interest income (53) (46)
Amortization of regulatory
deferred charges 0 1,436
Amortization of regulatory
deferred liabilities 0 (1,343)
Amortization of investment
tax credits (575) (851)
Other, net 37 140
--------- ---------
Total income tax expense $16,702 $15,437
========= =========
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<PAGE>
The significant components of deferred income tax expense attributable to
income from continuing operations for the nine-month periods ended September
30, 1996 and 1995 were the following:
Nine Months Ended September 30,
(Dollars in thousands) 1996 1995
- - ---------------------------------------------------------------
Deferred tax expense $ 782 $ (329)
Amortization of regulatory
deferred charges 0 1,436
Amortization of regulatory
deferred liabilities 0 (1,343)
-------- ---------
Total deferred tax expense $ 782 $ (236)
======== =========
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
September 30, 1996 and December 31, 1995 are presented in the following:
(Dollars in thousands) September 30, 1996 December 31, 1995
- - ----------------------------------------------------------------------
Deferred tax assets:
Accumulated post-retirement
benefit cost $18,117 $17,493
Voluntary Early Retirement
Program 6,081 7,697
Other 2,325 2,686
--------- ---------
Total gross deferred tax
assets 26,523 27,876
Less valuation allowance -- --
--------- ---------
Net deferred tax assets $26,523 $27,876
========= =========
Deferred tax liabilities:
Plant and equipment,
principally due to
depreciation differences $30,443 $30,820
Other 1,631 1,825
--------- ---------
Total gross deferred tax
liabilities 32,074 32,645
--------- ---------
Net deferred tax
liabilities $ 5,551 $ 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 nine-month periods ended
September 30, 1996 and 1995 include the following components:
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<PAGE>
Nine Months Ended September 30,
(Dollars in thousands) 1996 1995
- - -----------------------------------------------------------------
Service cost $ 343 $ 268
Interest cost 2,971 2,896
Unrecognized prior service cost 81 8
Amortization of unrecognized loss 24 147
--------- ---------
Net periodic postretirement
benefit costs $ 3,419 $ 3,319
========= =========
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 were
assumed for 1996 and 1995. The 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 September 30, 1996 and December
31, 1995. This information is summarized as follows:
September 30, 1996
- - -----------------------------------------------------------------------
Estimated
Amortized Gross Unrealized Market
(Dollars in thousands) Cost Gains Losses Value
- - -----------------------------------------------------------------------
U.S. Government
obligations $ 2,424 1 (41) 2,384
U.S. Government agency
obligations 4,061 27 (91) 3,997
Corporate debt
securities 620 10 (39) 591
--------- ------- --------- --------
$ 7,105 38 (171) 6,972
========= ======= ========= ========
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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 gain/(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 September 30, 1996 and December 31,
1995.
The amortized cost and estimated market value of debt securities at
September 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.
September 30, 1996
- - ----------------------------------------------------------------
Estimated
Amortized Market
(Dollars in thousands) Cost Value
- - ----------------------------------------------------------------
Due after three months through
five years $ 1,638 $ 1,643
Due after five years through
ten years 5,467 5,329
--------- ---------
$ 7,105 $ 6,972
========= =========
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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 September 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 nine-month period ended September 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
Third Quarter 1996 Nine Months 1996
Increase (Decrease) Increase (Decrease)
Over Third Over Nine
Quarter 1995 Months 1995
------------------- -------------------
Operating revenues:
Telephone revenues:
Local network services 4.1% 4.9%
Access services (1.5%) 5.4%
Long distance services (7.2%) (6.5%)
Other wireline communications
services 2.1% 5.6%
Total telephone revenues 1.0% 4.2%
Wireless communications services 35.0% 32.0%
Telephone equipment sales
and services 1.6% (6.9%)
Total operating revenues 3.6% 5.9%
All comparisons hereinafter made are of the third quarter and nine-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 $732,000 (4.1%) and $2,600,000
(4.9%), respectively. Basic local services revenue increased $602,000
(4.6%) and $1,862,000 (4.8%) led by growth in business and Centrex services
revenue for the three- and nine-month periods. Residential and business
telephone access lines in service grew by 8,400 (3.3%) from September 30,
1995. Expanded area services revenue increased $16,000 (.8%) and $411,000
(7.4%) due to increased usage.
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<PAGE>
Access services revenue decreased $216,000 (1.5%) and increased $2,166,000
(5.4%), respectively. In 1995, these revenues had benefited from an out-of
period adjustment of $624,000 related to prior years. Overall minutes of
use increased by 6.5% and 7.7%, respectively.
Long distance services revenue decreased $234,000 (7.2%) and $642,000
(6.5%), 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 $125,000 (2.1%) and $991,000 (5.6%) for
the three- and nine-month periods.
Wireless communications services revenues increased $1,270,000 (35.0%) and
$3,296,000 (32.0%), respectively, and the number of cellular customer lines
increased by 10,533 (40.4%) since September 30, 1995.
Telephone equipment sales and service revenue increased $27,000 (1.6%) and
decreased $387,000 (6.9%), respectively.
Total operating revenues increased $1,704,000 (3.6%) and $8,024,000 (5.9%)
for the three- and nine-month periods ended September 30, 1996.
Operating Expenses
Third Quarter 1996 Nine Months 1996
Increase (Decrease) Increase (Decrease)
Over Third Over Nine
Quarter 1995 Months 1995
------------------- -------------------
Depreciation 10.9% 12.6%
Other operating expenses 6.9% 5.7%
Restructuring charge (100.0%) (100.0%)
Taxes, other than payroll
and income 8.8% .3%
Total operating expenses 2.8% 5.6%
All comparisons hereinafter made are of the third quarter and nine-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 $910,000 (10.9%) and $3,080,000 (12.6%) for the
three- and nine-month periods ended September 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
-17-
<PAGE>
prescribed by regulatory commissions, causing an increase in depreciation of
$678,000 and $2,019,000, respectively.
Total operating expenses increased $900,000 (2.8%) and $5,222,000 (5.6%) for
the three- and nine-month periods.
Non-Operating Income (Expense)
Third Quarter 1996 Nine Months 1996
Increase (Decrease) Increase (Decrease)
Over Third Over Nine
Quarter 1995 Months 1995
------------------- -------------------
Income from interest and
other investments (12.2%) 14.4%
Interest expense and other
deductions (13.2%) (12.3%)
Net non-operating expenses (13.5%) (22.0%)
Income from interest and other investments decreased $42,000 (12.2%) and
increased $173,000 (14.4%), respectively.
Interest expense and other deductions decreased $189,000 (13.2%) and
$559,000 (12.3%) for the third quarter and nine-month period when compared
to 1995.
Income Taxes
Income taxes increased $334,000 (6.3%) and $1,265,000 (8.2%) for the three-
and nine-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) On August 1, 1996, Registrant filed a Form 8-K to report
the Registrant's corporate name change from The Lincoln
Telephone and Telegraph Company to Aliant Communications
Co.
-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.
Aliant Communications Co.
------------------------------
(Registrant)
November 14, 1996 /s/ Robert L. Tyler
Date..................... ......................................
(Signature)
Robert L. Tyler, Senior Vice President-
Chief Financial Officer
November 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.
27 Financial Data Schedule
-21-
<PAGE>
</TABLE>
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