<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934.
Date of Report (Date of earliest event reported): May 15, 1998
----------------------
HICKORY TECH CORPORATION
- ------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 0-13721 41-1524393
- ------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
221 East Hickory Street, P.O. Box 3248, Mankato, MN 56002-3248
- ------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number including area code (800) 326-5789
--------------
<PAGE>
The only purpose of this amendment is to file certain financial
statements and exhibits required by Item 7 to the Registrant's Current
Report on Form 8-K dated and filed on May 15, 1998.
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 hereunto duly authorized.
Date: July 15, 1998
-------------------
HICKORY TECH CORPORATION
By /s/ Robert D. Alton, Jr.
-----------------------------------------------
Robert D. Alton, Jr., Chief Executive Officer
By /s/ David A. Christensen
-----------------------------------------------
David A. Christensen, Chief Financial Officer
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
The following financial statements and pro forma financial information
are filed as part of this report:
(a) Financial Statements of Business Acquired
PAGE Dowdy Minnesota 10, Inc. and MLD Minnesota 10, Inc. Combined
Financial Statements:
F-1 Report of Independent Accountants
F-2 Combined Balance Sheet as of December 31, 1997
F-3 Combined Statement of Operations and Accumulated Deficit for
the Year Ended December 31, 1997
F-4 Combined Statement of Cash Flows for the Year Ended December
31, 1997
F-5 Notes to Financial Statements
F-11 Combined Condensed Balance Sheet (Unaudited) as of March 31,
1998
F-12 Combined Condensed Statements of Operations (Unaudited) for the
Three Months Ended March 31, 1998 and March 31, 1997
F-13 Combined Condensed Statements of Cash Flows (Unaudited) for the
Three Months Ended March 31, 1998 and March 31, 1997
F-14 Notes to Unaudited Combined Condensed Financial Statements
(b) PF-1 Pro Forma Financial Information
PF-2 Pro Forma Combined Condensed Balance Sheet (Unaudited) as
of March 31, 1998
PF-3 Pro Forma Combined Condensed Statement of Operations
(Unaudited) for the Year Ended December 31, 1997
PF-4 Pro Forma Combined Condensed Statement of Operations
(Unaudited) for the Three Months Ended March 31, 1998
PF-5 Notes to Unaudited Pro Forma Combined Condensed Financial
Statements
<PAGE>
Report of Independent Accountants
To the Board of Directors of
Dowdy Minnesota 10, Inc. and MLD Minnesota 10, Inc.:
In our opinion, the accompanying combined balance sheet and the related
combined statements of operations and accumulated deficit and cash flows
present fairly, in all material respects, the combined financial position of
Dowdy Minnesota 10, Inc. and MLD Minnesota 10, Inc. (d/b/a Cellular One) as
of December 31, 1997, and the combined results of its operations and its cash
flows for the year then ended in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on
these financial statements based on our audit. We conducted our audit of
these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
July 8, 1998
F-1
<PAGE>
Dowdy Minnesota 10, Inc. and MLD Minnesota 10, Inc.
(d/b/a Cellular One)
Combined Balance Sheet
as of December 31, 1997
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Current assets:
Cash and cash equivalents $ 29,665
Accounts receivable, less allowance for doubtful accounts of $229,667 1,147,847
Prepaid expenses 98,592
Inventories 207,883
Deferred taxes 107,177
-----------
Total current assets 1,591,164
Cellular plant and equipment, net 3,521,951
Goodwill, net 14,331,367
FCC license, net 1,645,750
Customer list, net 51,417
-----------
Total assets $21,141,649
-----------
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 420,542
Accrued liabilities 663,035
Due to Frontier 718,725
Income taxes payable 36,176
-----------
Total current liabilities 1,838,478
Deferred taxes 806,194
-----------
Total liabilities 2,644,672
-----------
Stockholders' equity:
Common stock (Dowdy and MLD each have 100 shares of $.01 par value
issued and outstanding, 1,000,000 shares authorized) 2
Additional paid-in capital 19,655,167
Accumulated deficit (1,158,192)
-----------
Total stockholders' equity 18,496,977
-----------
Total liabilities and stockholders' equity $21,141,649
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-2
<PAGE>
Dowdy Minnesota 10, Inc. and MLD Minnesota 10, Inc.
(d/b/a Cellular One)
Combined Statement of Operations and Accumulated Deficit
for the year ended December 31, 1997
<TABLE>
<S> <C>
Operating revenues:
Retail service $ 4,911,217
Roamer service 1,755,218
Equipment sales 326,300
-----------
6,992,735
-----------
Operating expenses:
Selling, general and administrative 2,715,934
Operations and maintenance 729,038
Cost of equipment sold 928,096
Depreciation 633,233
Amortization 816,634
-----------
5,822,935
-----------
Operating income 1,169,800
Other expenses:
Interest expense (47,638)
Miscellaneous expense (23,983)
-----------
Net income before taxes 1,098,179
Income taxes 630,071
-----------
Net income 468,108
Accumulated deficit, beginning of year (1,626,300)
-----------
Accumulated deficit, end of year $(1,158,192)
-----------
-----------
Earnings per share $ 2,341
-----------
-----------
Earnings per share assuming dilution $ 2,341
-----------
-----------
Weighted average shares outstanding 200
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-3
<PAGE>
Dowdy Minnesota 10, Inc. and MLD Minnesota 10, Inc.
(d/b/a Cellular One)
Combined Statement of Cash Flows
for the year ended December 31, 1997
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income $ 468,108
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation 633,233
Amortization 816,634
Provision for bad debts 317,539
Deferred tax provision (146,105)
Gain on sale of cellular plant and equipment (664)
Changes in assets and liabilities:
Accounts receivable (221,429)
Inventories (114,618)
Prepaid expenses 4,987
Accounts payable (442,685)
Accrued liabilities (91,737)
Income taxes payable 19,870
-----------
Net cash provided by operating activities 1,243,133
-----------
Cash flows from investing activities:
Payments for cellular plant and equipment (1,051,791)
Proceeds from sale of cellular plant and equipment 2,450
-----------
Net cash used in investing activities (1,049,341)
-----------
Cash flows from financing activities:
Cash overdraft (142,240)
Principal payment on long-term debt (5,571)
Due to Frontier (16,316)
-----------
Net cash used in financing activities (164,127)
-----------
Net change in cash and cash equivalents 29,665
Cash and cash equivalents, beginning of year -
-----------
Cash and cash equivalents, end of year $ 29,665
-----------
-----------
Supplemental cash flow disclosure:
Interest paid $ 46,933
-----------
-----------
Income taxes paid $ 846,909
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-4
<PAGE>
Dowdy Minnesota 10, Inc. and MLD Minnesota 10, Inc.
(d/b/a Cellular One)
Notes to Financial Statements
1. Organization and Basis of Presentation:
Dowdy Minnesota 10, Inc. (Dowdy) and MLD Minnesota 10, Inc. (MLD) each hold
a fifty percent general partnership interest in Minnesota Southern Cellular
Telephone Company (the Partnership), a general partnership which holds the
A-block cellular license for Minnesota Rural Service Area 10 - Le Sueur
(Minnesota RSA 10). The Partnership provides cellular telephone services
in this licensed area. Dowdy and MLD are wholly-owned subsidiaries of
Frontier Cellular Holding, Inc. (Frontier Cellular) which is a wholly-owned
subsidiary of Frontier Corporation (Frontier). Other than their ownership
interests in the Partnership, neither Dowdy nor MLD own any assets
including stock or equity interest in any other entities, nor do they have
any liabilities. Also, neither Dowdy nor MLD have any employees and are
not engaged in any other business activities outside their ownership
interest in the Partnership.
Effective April 30, 1998, Frontier Cellular and Frontier entered into a
stock purchase agreement with Hickory Tech Corporation (HTC) whereby
Frontier Cellular sold all of its issued and outstanding stock of Dowdy and
MLD, which includes 100% ownership interest in the Partnership, to HTC in
exchange for $40 million. HTC subsequently transferred its ownership
interest in Dowdy and MLD to its 100% owned subsidiary, Minnesota Southern
Wireless Corporation.
These financial statements present the combined financial position, results
of operations and cash flows of Dowdy and MLD including their combined 100%
interest in the operations of the Partnership. Dowdy and MLD are
hereinafter collectively referred to as the Company.
2. Summary of Significant Accounting Policies:
Estimates:
The Company prepares its financial statements in conformity with generally
accepted accounting principles, which require management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses during the period presented. They also affect the
disclosure of contingencies. Actual results could differ from those
estimates.
Cash and Cash Equivalents:
Cash and cash equivalents include cash and those short-term, highly liquid
investments with original maturities of three months or less.
F-5
<PAGE>
2. Summary of Significant Accounting Policies, continued:
Trade Accounts Receivable:
The Company grants credit to a diversified group of customers, most of whom
are located in south central Minnesota. The risk of loss on the unsecured
accounts receivable is the balance owed at the time of default. Management
has established an allowance for uncollectible accounts based on their
estimate of potential uncollectible balances. Allowance for uncollectible
accounts was $229,667 as of December 31, 1997.
Cellular Telephone Inventory:
Inventory consists primarily of cellular phones and accessories held for
resale with cost determined using the average cost method. Consistent with
industry practice, losses on sales of cellular phones are recognized in the
period in which sales are made as a cost of acquiring subscribers.
Cellular Plant and Equipment:
Cellular plant and equipment is stated at its original cost. Depreciation
is provided on a straight-line basis over the estimated useful lives of the
cellular plant and equipment, which ranges from two to twenty years.
Cellular plant and equipment consists of the following:
<TABLE>
<S> <C>
Cellular plant and equipment $ 6,502,088
Less accumulated depreciation (2,980,137)
-----------
$ 3,521,951
-----------
-----------
</TABLE>
Revenue Recognition:
Cellular air time is recorded as revenue when earned. Sales of equipment
and related services are recorded as revenue when the goods and services
are delivered. Cellular access charges are billed in advance and
recognized as revenue when the services are provided.
Advertising:
Advertising costs are expensed as incurred. Total advertising expenses
were $257,015 for the year ended December 31, 1997.
F-6
<PAGE>
2. Summary of Significant Accounting Policies, continued:
Intangible Assets:
In conjunction with its 1995 purchase of Minnesota RSA 10, the Company
recorded the following intangible assets:
- FCC License - The fair value placed on the FCC license to provide
cellular service to FCC market No. 491A. This license is being
amortized on a straight-line basis over ten years.
- Customer List - The fair value placed on the acquired established
customer base is being amortized on a straight-line basis over three
years.
- Goodwill - The excess of amounts paid over the fair value of tangible
and intangible assets acquired is being amortized on a straight-line
basis over 40 years. The Company evaluates the realizability of
goodwill based upon expectations of nondiscounted cash flows and
operating income. Based upon its most recent analysis, the Company
believes that no material impairment of goodwill exists.
These assets are recorded in the combined balance sheet net of accumulated
amortization which was $2,241,991 at December 31, 1997.
Income Taxes:
The Company is included in Frontier's consolidated federal income tax
return, as well as Frontier's unitary Minnesota state income tax return.
Pursuant to Frontier's tax-sharing arrangements, the Company makes or
receives payments equal to the tax expenses realized by including the
Company's income in these consolidated/unitary returns. The Company
computes its income tax provision on a separate return basis. Income taxes
are provided based on the liability method of accounting. Deferred income
taxes are recorded to reflect the tax consequences on future years of
differences between the basis in assets and liabilities as measured in the
combined financial statements and as measured by tax laws using enacted tax
rates.
F-7
<PAGE>
3. Commitments:
Future minimum rental payments required under operating leases, principally
for real estate related to tower sites, that have initial or remaining
noncancellable lease terms in excess of one year as of December 31, 1997,
are as follows:
<TABLE>
<S> <C>
1998 $ 54,591
1999 49,029
2000 42,629
2001 20,271
2002 10,800
Thereafter 49,500
--------
$226,820
--------
--------
</TABLE>
Rental expense was $191,379 for the year ended December 31, 1997.
The Company has entered into an agreement with a third party to purchase
certain equipment in the amount of $296,000 in both 1998 and 1999.
4. Employee Benefits:
Effective October 13, 1995, the Company adopted the Frontier Group
Employees' Retirement Savings Plan (the 401(k) Plan) for all employees who
meet certain service requirements. The 401(k) Plan is comprised of a fixed
contribution, matching contribution and a discretionary profit sharing
contribution component. Participating employees may contribute up to a
total of 16% of eligible compensation. Contributions can be made before
and/or after tax, not to exceed the 16% total. The Company provides a
fixed contribution of one-half of one percent of all eligible employees'
compensation each pay period and also matches 100% of the first 3% of each
participant's contribution.
Company contributions are 100% vested immediately, however, all employer
contributions will be invested initially in common stock of Frontier and
must remain so invested until the shorter of the participant's employment
or a five-year holding period. The Company contributed $23,238 to the
401(k) Plan during 1997.
F-8
<PAGE>
5. Income Taxes:
The provision for income taxes is summarized as follows:
<TABLE>
<S> <C>
Federal:
Current $ 592,310
Deferred (111,495)
---------
480,815
---------
State:
Current 183,866
Deferred (34,610)
---------
149,256
---------
Total $ 630,071
---------
---------
</TABLE>
The tax effect of the temporary differences which give rise to the deferred
tax asset and deferred tax liability recorded at December 31, 1997 include
the following:
<TABLE>
<S> <C>
Deferred tax asset:
Allowance for doubtful accounts $ 95,013
Inventory allowance for obsolescence 12,164
--------
$107,177
--------
--------
Deferred tax liability:
FCC license and customer list $702,118
Cellular plant and equipment 65,257
Other 38,819
--------
$806,194
--------
--------
</TABLE>
A reconciliation of the income tax provision and the amount computed by
applying the statutory federal income tax rate to pre-tax income is as
follows:
<TABLE>
<S> <C>
Federal statutory tax rate 35.0%
State income taxes, net of federal income tax benefit 6.4
Permanent difference related to goodwill amortization 14.4
Other permanent differences 1.6
----
57.4%
----
----
</TABLE>
F-9
<PAGE>
6. Related Party Transactions:
Frontier provides the Company with certain management, accounting and
administrative services. Under Frontier's corporate expense allocation
policy, expenses which can be specifically identified are directly
allocated to the Company. For mutually beneficial costs, the Company is
allocated a portion based on the Company's proportion of these costs in
relation to all of Frontier's subsidiaries based upon the weighted average
of the following four factors: number of employees, revenues,
capitalization and common equity. These costs primarily include legal
services, executive management, information technology support and certain
purchasing and payroll support. The total Frontier costs allocated to the
Company were $82,130 during 1997.
These allocated costs along with advances to the Company by Frontier to
fund operating costs and capital expenditures are recorded in the due to
Frontier account. This amount is due upon demand and bears interest at
rates varying from 5.40% to 5.82% at December 31, 1997.
The Company pays Frontier toll charges for certain long distance traffic
originated by the Company's subscribers. The Company, in turn, charges
subscribers for this usage. Total toll charges paid to Frontier during
1997 were $177,567.
F-10
<PAGE>
Dowdy Minnesota 10, Inc. and MLD Minnesota 10, Inc.
(d/b/a Cellular One)
Combined Condensed Balance Sheet
(UNAUDITED)
<TABLE>
<S> <C>
3/31/98
------------
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $ --
Accounts Receivable, net 999,826
Inventories 254,277
Deferred Income Taxes and Other 140,817
------------
TOTAL CURRENT ASSETS 1,394,920
------------
CELLULAR PLANT & EQUIPMENT, NET 3,340,609
INTANGIBLE ASSETS, NET 15,824,375
------------
TOTAL ASSETS $20,559,904
------------
------------
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable and Accrued Liabilities $ 668,981
Due to Frontier 250,296
Income Taxes Payable 133,252
------------
TOTAL CURRENT LIABILITIES 1,052,529
DEFERRED INCOME TAXES 881,301
STOCKHOLDERS' EQUITY:
Common Stock 2
Additional Paid-In Capital 19,655,167
Accumulated Deficit (1,029,095)
------------
TOTAL STOCKHOLDERS' EQUITY 18,626,074
------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $20,559,904
------------
------------
</TABLE>
The accompanying notes are an integral part of the
combined condensed financial statements.
F-11
<PAGE>
Dowdy Minnesota 10, Inc. and MLD Minnesota 10, Inc.
(d/b/a Cellular One)
Combined Condensed Statements of Operations
(UNAUDITED)
<TABLE>
<CAPTION>
For Three Months Ended
3/31/98 3/31/97
----------- -----------
<S> <C> <C>
OPERATING REVENUES $ 1,805,910 $ 1,608,561
COSTS AND EXPENSES
Cost of Sales 287,381 250,095
Operating Expenses 852,449 801,233
Depreciation 188,003 146,905
Amortization and Intangibles 204,159 204,159
----------- -----------
TOTAL COSTS AND EXPENSES 1,531,992 1,402,392
----------- -----------
OPERATING INCOME 273,918 206,169
OTHER INCOME 36,906 44,737
INTEREST EXPENSE (7,547) (10,819)
----------- -----------
INCOME BEFORE INCOME TAXES 303,277 240,087
INCOME TAXES 174,180 137,809
----------- -----------
NET INCOME $ 129,097 $ 102,278
----------- -----------
----------- -----------
EARNINGS PER SHARE $ 645 $ 511
----------- -----------
----------- -----------
EARNINGS PER SHARE ASSUMING DILUTION $ 645 $ 511
----------- -----------
----------- -----------
WEIGHTED AVERAGE SHARES OUTSTANDING 200 200
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of the
combined condensed financial statements.
F-12
<PAGE>
Dowdy Minnesota 10, Inc. and MLD Minnesota 10, Inc.
(d/b/a Cellular One)
Combined Condensed Statements of Cash Flows
(UNAUDITED)
<TABLE>
<CAPTION>
For Three Months Ended
3/31/98 3/31/97
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 129,097 $ 102,278
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities 328,392 165,115
Cash flows from investing activities:
Payments for cellular plant and equipment (6,661) (81,861)
Cash flows from financing activities:
Cash overdraft -- (142,240)
Due to Frontier (480,493) (38,156)
----------- -----------
Net change in cash and cash equivalents (29,665) 5,136
Cash and cash equivalents, beginning of period 29,665 --
----------- -----------
Cash and cash equivalents, end of period $ -- $ 5,136
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of the
combined condensed financial statements.
F-13
<PAGE>
Notes to the Combined Condensed Financial Statements
The preceding unaudited combined balance sheet, statements of income and
statements of cash flows contain all adjustments representing normal recurring
items which are in the opinion of management necessary to present a fair
statement of the financial position and results of operations and cash flows
for the interim periods being reported.
1. Basis of Presentation
Dowdy Minnesota 10, Inc. (Dowdy) and MLD Minnesota 10, Inc. (MLD) each hold
a fifty percent general partnership interest in Minnesota Southern Cellular
Telephone Company (the Partnership), a general partnership which holds the
A-block cellular license for Minnesota Rural Service Area 10 - Le Sueur
(Minnesota RSA 10). Dowdy and MLD are wholly owned subsidiaries of
Frontier Cellular Holding, Inc. (Frontier Cellular) which is a wholly owned
subsidiary of Frontier Corporation (Frontier). Other than their ownership
interests in the Partnership, neither Dowdy nor MLD own any assets
including stock or equity interest in any other entities, nor do they have
any liabilities. Also, neither Dowdy nor MLD have any employees and are
not engaged in any other business activities outside their ownership
interest in the Partnership.
These financial statements present the combined financial position, results
of operations and cash flows of Dowdy and MLD including their combined 100%
interest in the operations of the Partnership.
2. Other
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested these condensed
combined financial statements be read in conjunction with the audited
combined financial statements of Dowdy and MLD as of December 31, 1997 and
for the year then ended included herein.
F-14
<PAGE>
HICKORY TECH CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
STATEMENTS
On May 1, 1998, Hickory Tech Corporation (HTC) completed a stock purchase
agreement with Frontier Corporation and its wholly owned subsidiary Frontier
Cellular Holding, Inc. (Frontier Cellular). Frontier sold all of its issued and
outstanding stock of two wholly owned subsidiaries, Dowdy Minnesota 10, Inc.
(Dowdy) and MLD Minnesota 10, Inc. (MLD), which each a held fifty percent
general partnership interest in Minnesota Southern Cellular Telephone Company
(the Partnership), a general partnership which holds the A-block cellular
license for what is known in the industry as Minnesota Rural Service Area 10.
The unaudited pro forma combined condensed financial statements as of December
31, 1997 and for the three month period ended March 31, 1998 and year ended
December 31, 1997 were prepared using the purchase method of accounting,
assuming the acquisition occurred on the date of the balance sheet or as of
January 1, 1997, the beginning of the most recent fiscal year, for purposes of
the statements of operations. The pro forma adjustments are based upon
currently available information and upon certain assumptions.
The unaudited pro forma combined condensed financial statements are provided for
informational purposes only and are not necessarily indicative of the results of
future operations or the future financial condition of HTC or the actual results
of operations that would have been achieved had the acquisition of Dowdy and MLD
been consummated as of the beginning of the periods presented.
The pro forma adjustments are based on preliminary assumptions of the allocation
of purchase price and are subject to substantial revision once appraisals and
evaluations and other studies of the fair market value of Dowdy and MLD assets
and liabilities are completed. Accordingly, final purchase accounting
adjustments may differ substantially from the pro forma adjustments presented
herein.
PF-1
<PAGE>
HICKORY TECH CORPORATION
Pro Forma Combined Condensed Balance Sheet
as of March 31, 1998
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Dowdy MN 10, Inc.
Hickory Tech and Pro Forma Pro Forma
Corporation MLD MN 10, Inc Adjustments Results
------------ ----------------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $ 3,633 $ -- $ (2,287)(e) $ 1,346
Accounts Receivable 14,337 1,000 -- 15,337
Inventories 3,147 254 -- 3,401
Deferred Tax Benefit and Other 1,534 141 -- 1,675
---------- --------- ----------- ---------
TOTAL CURRENT ASSETS 22,651 1,395 (2,287) 21,759
INVESTMENTS 3,771 -- -- 3,771
PROPERTY, PLANT & EQUIPMENT, NET 57,017 3,341 1,659 (g) 62,017
INTANGIBLE ASSETS, NET 31,985 15,824 19,752 (h) 67,561
OTHER 636 -- -- 636
TOTAL ASSETS $ 116,060 $ 20,560 $ 19,124 $ 155,744
---------- --------- ----------- ---------
---------- --------- ----------- ---------
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 5,429 $ 920 $ (250)(f) $ 6,099
Accrued Interest 1,456 -- -- 1,456
Accrued Taxes 1,861 133 -- 1,994
Advanced Billings & Deposits 2,686 -- -- 2,686
Current Maturities of Long-Term Debt 439 -- -- 439
---------- --------- ----------- ---------
TOTAL CURRENT LIABILITIES 11,871 1,053 (250) 12,674
LONG-TERM DEBT, NET OF CURRENT MATURITIES 41,531 -- 38,000 (e) 79,531
DEFERRED INCOME TAXES 2,474 881 -- 3,355
DEFERRED COMPENSATION AND OTHER 3,147 -- -- 3,147
SHAREHOLDERS' EQUITY:
Common Stock 454 -- -- 454
Additional Paid-In Capital 2,307 19,655 (19,655)(j) 2,307
Reinvested Earnings 54,276 (1,029) 1,029 (j) 54,276
---------- --------- ----------- ---------
TOTAL SHAREHOLDERS' EQUITY 57,037 18,626 (18,626) 57,037
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 116,060 $ 20,560 $ 19,124 $ 155,744
---------- --------- ----------- ---------
---------- --------- ----------- ---------
</TABLE>
See accompanying notes to unaudited pro forma
combined condensed financial statements.
PF-2
<PAGE>
HICKORY TECH CORPORATION
Pro Forma Combined Condensed Statement of Operations
for the year ended December 31, 1997
(Unaudited)
(In thousands, except per-share data)
<TABLE>
<CAPTION>
Dowdy MN 10, Inc.
Hickory Tech and Pro Forma Pro Forma
Corporation MLD MN 10, Inc. Adjustments Results
------------ ----------------- ----------- ----------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Telephone $ 42,835 $ -- $ -- $ 42,835
Billing/Data Services 9,474 -- -- 9,474
Communications Products and Services 24,153 6,993 -- 31,146
------------ --------- ----------- ----------
TOTAL OPERATING REVENUES 76,462 6,993 -- 83,455
COSTS AND EXPENSES
Cost of Sales 16,503 928 -- 17,431
Operating Expenses 31,313 3,445 (k) -- 34,758
Depreciation 6,761 633 201 (b) 7,595
Amortization of Intangibles 1,229 817 86 (a) 2,132
------------ --------- ----------- ----------
TOTAL COSTS AND EXPENSES 55,806 5,823 287 61,916
------------ --------- ----------- ----------
OPERATING INCOME 20,656 1,170 (287) 21,539
OTHER INCOME 1,762 (24) -- 1,738
GAIN ON SALE OF DIRECTV ASSETS 6,345 -- -- 6,345
INTEREST EXPENSE (2,292) (48) (2,438)(c) (4,778)
------------ --------- ----------- ----------
INCOME BEFORE INCOME TAXES 26,471 1,098 (2,725) 24,844
INCOME TAXES 10,992 630 (1,127)(d) 10,495
------------ --------- ----------- ----------
CONSOLIDATED NET INCOME $ 15,479 $ 468 $ (1,598) $ 14,349
------------ --------- ----------- ----------
------------ --------- ----------- ----------
EARNINGS PER SHARE $ 3.36 $ 3.12(i)
------------ ----------
EARNINGS PER SHARE
ASSUMING DILUTION $ 3.36 $ 3.12(i)
------------ ----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements.
PF-3
<PAGE>
HICKORY TECH CORPORATION
Pro Forma Combined Condensed Statement of Operations
for the three months ended March 31, 1998
(Unaudited)
(In thousands, except per-share data)
<TABLE>
<CAPTION>
Dowdy MN 10, Inc.
Hickory Tech and Pro Forma Pro Forma
Corporation MLD MN 10, Inc. Adjustments Results
------------ ----------------- ----------- ----------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Telephone $ 11,670 $ -- $ -- $ 11,670
Billing/Data Services 2,158 -- -- 2,158
Communications Products and Services 6,850 1,806 -- 8,656
------------ --------- ----------- ----------
TOTAL OPERATING REVENUES 20,678 1,806 -- 22,484
COSTS AND EXPENSES
Cost of Sales 5,137 287 -- 5,424
Operating Expenses 7,869 853 (k) -- 8,722
Depreciation 1,858 188 50 (b) 2,096
Amortization of Intangibles 202 204 21 (a) 427
------------ --------- ----------- ----------
TOTAL COSTS AND EXPENSES 15,066 1,532 71 16,669
------------ --------- ----------- ----------
OPERATING INCOME 5,612 274 (71) 5,815
OTHER INCOME 347 37 -- 384
INTEREST EXPENSE (772) (8) (646)(c) (1,426)
------------ --------- ----------- ----------
INCOME BEFORE INCOME TAXES 5,187 303 (717) 4,773
INCOME TAXES 2,145 174 (284)(d) 2,035
------------ --------- ----------- ----------
CONSOLIDATED NET INCOME $ 3,042 $ 129 $ (433) $ 2,738
------------ --------- ----------- ----------
------------ --------- ----------- ----------
EARNINGS PER SHARE $ 0.67 $ 0.60(i)
------------ ----------
EARNINGS PER SHARE
ASSUMING DILUTION $ 0.67 $ 0.60(i)
------------ ----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements.
PF-4
<PAGE>
HICKORY TECH CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
(a) To amortize the purchase accounting adjustments related to excess purchase
price over the fair value of the assets acquired, as if the acquisition
occurred on January 1, 1997. HTC will amortize this amount over 40 years.
(b) To record additional depreciation expense related to excess value
assigned to cellular plant and equipment upon the purchase, as if the
acquisition occurred on January 1, 1997. HTC has assigned useful lives
to the cellular plant and equipment ranging from two to twenty years.
(c) To increase interest expense by applying HTC's effective borrowing rate
of 6.54% on the line of credit obtained to finance the acquisition. This
increase was offset by the decrease in interest expense related to the
due to Frontier balance which was not transferred to HTC upon the
purchase.
(d) To record the income tax benefit resulting from lower earnings due to
increased amortization expense, interest expense and depreciation expense.
(e) To record the amount of cash and line of credit used to finance the
acquisition.
<TABLE>
<S> <C>
Purchase price of Dowdy and MLD stock $40,000,000
Estimated capitalized fees 287,000
-----------
Total $40,287,000
</TABLE>
(f) To eliminate the balances due to Frontier, which were not
transferred to HTC pursuant to the purchase agreement.
(g) To record the excess of fair value assigned to cellular plant and
equipment by HTC upon the purchase over net book value recorded on the
combined Dowdy and MLD financial statements, as if the acquisition
occurred on March 31, 1998.
(h) To record the excess purchase price over the fair value of the assets
acquired as if the acquisition occurred on March 31, 1998.
(i) Earnings per share is calculated using HTC's historical weighted average
shares outstanding of 4,603,957 and fully diluted shares of 4,605,742 for
the year ended December 31, 1997 and historical weighted average shares
outstanding of 4,538,586 and fully diluted shares of 4,550,224 for the
three month period ended March 31, 1998.
PF-5
<PAGE>
(j) To eliminate Dowdy's and MLD's stockholders' equity.
(k) Frontier provided Dowdy and MLD with certain services such as legal
consultation, executive management, information technology support and
purchasing and payroll support. These costs were allocated to Dowdy and
MLD either directly or by other allocation methodologies which Frontier
management believes represent Dowdy's and MLD's proportionate share of
these costs relative to all of Frontier's subsidiaries. These allocated
costs are included in this amount. HTC management believes they would have
incurred similar costs at substantially the same amounts, and accordingly,
no pro forma adjustment has been made.
PF-6
