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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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): April 10, 1997
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HICKORY TECH CORPORATION
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(Exact name of registrant as specified in its charter)
Minnesota 0-13721 41-1524393
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(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
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(Address of principal executive offices) (Zip code)
Registrant's telephone number including area code (800) 326-5789
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The purpose for this amendment is to further depict and clarify the disclosures
associated with the Registrant's acquisition of telephone exchanges on April 10,
1997. In particular, the Pro Forma Statement of Income for the Year Ended
December 31, 1996 and Pro Forma Consolidated Balance Sheet as of December 31,
1996 have been expanded from three columns to four columns to depict the
adjustments required to reflect the combined activity. Further discussion is
also included on the data used by management to evaluate the decision to
purchase the telephone exchanges.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 10, 1997, the Registrant, under terms of a purchase agreement
originally dated June 15, 1995 and subsequently amended, acquired the assets of
11 rural telephone exchanges in the State of Iowa from US West Communications,
Inc., a Colorado corporation ("US West") for $35,271,000. The 11 exchanges
contain approximately 12,500 telephone access lines located in and around the
Iowa communities of Akron, Bancroft, Boyden, Doon, Hawarden, Hull, Ireton,
Lakota, Rock Rapids, Rock Valley, and Sibley. The acquisition was accounted for
as a purchase and approximately $22,322,000 of cost in excess of net assets
acquired was recorded.
The Registrant funded the acquisition by the issuance of long-term debt
instruments to seven institutional investors (insurance companies) in a private
placement. The long-term debt consists of Senior Unsecured Notes of $40 million
with final maturity in 15 years. The interest rate is fixed at 7.11%.
Pro forma financial statements are being filed herewith pursuant to
Rule 11-01(a)(5) of Regulation S-X.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(b) Pro forma financial information
The following pro forma financial information is attached:
(i) Pro forma statement of income and explanatory notes (not audited)
which show the pro forma effect on the historical results of
operations of the Registrant for the calendar year 1996, as if
the acquisition of the assets of the rural telephone exchanges
occurred at the beginning of the Registrant's fiscal year 1996
(January 1, 1996).
(ii) Pro forma balance sheet and explanatory notes (not audited) which
show the effect on the Registrant of the acquisition of the
assets of the rural telephone exchanges as of December 31, 1996,
as if the acquisition occurred on December 31, 1996.
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(c) Exhibits
None.
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: December 9, 1998
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HICKORY TECH CORPORATION
By /s/ Robert D. Alton, Jr.
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Robert D. Alton, Jr., Chief Executive Officer
By /s/ David A. Christensen
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David A. Christensen, Chief Financial Officer
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PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(NOT AUDITED)
(Dollars in Thousands, except Per Share Amounts)
<TABLE>
<CAPTION>
Acquired
Hickory US West Pro
Tech Telephone Pro Forma Forma
Corp Exchanges Adjustments Combined
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<S> <C> <C> <C> <C>
Operating Revenues $66,562 $8,279 $ - $74,841
Costs and Expenses 49,789 4,558 629 (a) 54,976
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Operating Income 16,773 3,721 (629) 19,865
Other Income & Expense 512 - (2,606)(b) (2,094)
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Inc. Before Income Taxes 17,285 3,721 (3,235) 17,771
Income Taxes 6,866 1,544 (1,342)(c) 7,068
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Net Income $10,419 $2,177 $(1,893) $10,703
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Earnings Per Share $2.09 (d) $2.15
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</TABLE>
NOTES TO PRO FORMA STATEMENT OF INCOME (NOT AUDITED)
The presented pro forma statement of income for the year ended December 31,
1996 consists of the historical statement of income of the Registrant plus
the estimated statement of income from the assets purchased from US West on
April 10, 1997 as if they were acquired on January 1, 1996. The assumptions
used to develop these estimates are set forth below.
OPERATING REVENUES AND EXPENSES ASSUMPTIONS
The pro forma revenues for the newly acquired rural telephone exchanges
were estimated based on the number of telephone access lines served by the
assets and an estimate of the minutes of use those lines would generate.
The resulting usage estimates were then multiplied by the rate elements
applied for by the Registrant. The pro forma operating expenses of the
newly acquired rural telephone exchanges were developed by estimating the
necessary staffing requirements to support their unique service and
geographic territories. In addition, operating expenses were estimated
based upon the Registrant's experience as a local telephone service
provider in similar geographic areas and its experience in completing
previous rural telephone exchange acquisitions.
To prepare a financial cashflow for an entity having no separate
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financial statement (i.e. the eleven telephone exchanges from US West were
never accounted for separately), the Registrant used the following
fundamental statistics:
<TABLE>
<S> <C>
Telephone Access Lines in 1994 12,200
Access Line growth rate 1.45%
Access Minutes of Use 62,363,000
Minute of Use growth rate 8.315%
Telephone Net Plant Balance (1994) $13,688,000
Accumulated Depreciation Proportion 40.38%
Real Estate Taxes Paid $886,000
</TABLE>
(The above statistics are summarized. There were eleven to thirty
three sets of factors (i.e. for each exchange, for each jurisdiction,
etc.)
In addition to these assumptions, which were unique to the US West
exchanges, the Registrant used their industry knowledge of matters, which
tend to be common to many Local Exchange Carriers of this size. Such common
assumptions include:
<TABLE>
<S> <C>
Operating Revenues per Access Line of approximately $700
Operating Expenses per Access Line of approximately $300
Routine Capital Expenditures per Access Line of approx. $75
</TABLE>
(a) DEPRECIATION AND AMORTIZATION ASSUMPTIONS
The pro forma property and equipment depreciation was computed using the
straight-line method at rates based on estimated service lives of the
assets as follows:
<TABLE>
<CAPTION>
Assets Service Lives
<S> <C>
Buildings 30 - 40 years
Telephone Plant and Equipment 5 - 40 years
</TABLE>
The pro forma cost in excess of the fair value of the net assets acquired
and cost associated with the acquisition were amortized over 40 years.
Depreciation and amortization expenses are included in the Costs and
Expenses.
(b) INTEREST EXPENSE ASSUMPTIONS
The Registrant borrowed $40 million to complete the purchase of the rural
telephone exchanges from US West on April 10, 1997. In the pro forma,
interest expense, as if the acquisition occurred on January 1, 1996, is
included in Other Income & Expense at a rate of 7.11%. The purchase price
to US West was $35,271,000.
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(c) INCOME TAX
A combined federal and state income tax rate of 41.5% was utilized for the
newly acquired assets.
(d) EARNINGS PER SHARE
Earnings per share were calculated based on 4,980,006 average shares
outstanding for the year ended December 31, 1996.
The pro forma statement of income is not necessarily indicative of the results
of operations as if acquisition occurred at the beginning of the period
presented, nor is it necessarily indicative of the results of future operations.
The pro forma statement of income and the notes should be read in conjunction
with the Registrant's consolidated financial statements and related notes for
the year ended December 31, 1996 incorporated in the Form 10-K filing dated
March 27, 1997.
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PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1996
(NOT AUDITED)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Acquired
US West
Hickory Telephone Pro Forma Pro Forma
Tech Corp Exchanges Adjustments Combined
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<S> <C> <C> <C> <C>
ASSETS
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Current Assets $17,967 $ - $ 4,729 $ 22,696
Investments 2,980 2,980
Net Property & Equip. 40,873 12,949 53,822
Intangible and Other Assets 9,443 - 22,322 31,765
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Total Assets $71,263 $12,949 $27,051 $111,263
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current Liabilities $11,688 $ - $ - $ 11,688
Long-Term Debt 877 40,000 40,877
Other Liabilities 6,071 6,071
Shareholders' Equity 52,627 12,949 (12,949) 52,627
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Total Liabilities and Shareholders' Equity $71,263 $12,949 $ 27,051 $111,263
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</TABLE>
NOTES TO PRO FORMA BALANCE SHEET (NOT AUDITED)
The presented pro forma balance sheet as of December 31, 1996 consists of
the historical balance sheet of the Registrant plus the assets purchased
from US West on April 10, 1997 as if they were purchased on December 31,
1996. The acquisition was accounted for under the purchase method of
accounting.
The $40 million long-term debt proceeds from the institutional investors
was utilized for the acquisition. The Registrant's transaction with US
West was summarized as cash paid of $35,271,000 for net property, plant and
equipment valued at $12,949,000 and costs in excess of net assets of
$22,322,000. The remaining cash from the long-term debt proceeds of
$4,729,000 will be utilized for ongoing capital expenditures for the newly
acquired rural telephone exchanges as well as the Registrant's existing
telephone exchanges.
The pro forma balance sheet is not necessarily indicative of the financial
position as if acquisition occurred on December 31, 1996 as presented, nor
is it necessarily indicative of the financial position in the future.
The pro forma balance sheet and the notes should be read in conjunction
with the Registrant's consolidated financial statements and related notes
for the year ended December 31, 1996 incorporated in the Form 10-K filing
dated March 27, 1997.
