<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): June 15, 1999
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 June 15, 1999.
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: August 13, 1999
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
<TABLE>
<CAPTION>
PAGE McElroy Electronics Cellular Service Area Financial Statements:
<S> <C>
F-1 Report of Independent Accountants
F-2 Balance Sheet as of December 31, 1998
F-3 Statement of Operations for the Year Ended December 31, 1998
F-4 Statement of Cash Flows for the Year Ended December 31, 1998
F-5 Statement of Member's Equity for the Year Ended December 31, 1998
F-6 Notes to Financial Statements
F-9 Condensed Balance Sheet (Unaudited) as of May 31, 1999
F-10 Condensed Statements of Operations (Unaudited) for the Five
Months Ended May 31, 1999 and May 31, 1998
F-11 Condensed Statements of Cash Flows (Unaudited) for the Five
Months Ended May 31, 1999 and May 31, 1998
F-12 Notes to Unaudited Condensed Financial Statements
(b) PF-1 Pro Forma Financial Information
PF-2 Pro Forma Condensed Balance Sheet (Unaudited) as of May 31, 1999
PF-3 Pro Forma Condensed Statement of Operations (Unaudited) for the
Year Ended December 31, 1998
PF-4 Pro Forma Condensed Statement of Operations (Unaudited) for the
Five Months Ended May 31, 1999
PF-5 Notes to Unaudited Pro Forma Condensed Financial Statements
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Members of Minneapolis Cellular Telephone Company, LLC
In our opinion, the accompanying balance sheet and the related statements of
operations, cash flows and member's equity present fairly, in all material
respects, the financial position of McElroy Electronics Cellular Service Area
(the "Company") at December 31, 1998, and the 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
August 6, 1999
F-1
<PAGE>
MCELROY ELECTRONICS CELLULAR SERVICE AREA
BALANCE SHEET
DECEMBER 31,1998
ASSETS
<TABLE>
<S> <C>
Current assets:
Accounts receivable $ 32,552
Prepaid expenses 4,710
------------
Total current assets 37,262
Cellular plant and equipment, net 1,178,949
------------
Total assets $ 1,216,211
------------
------------
LIABILITIES AND MEMBER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 54,000
Member's equity 1,162,211
------------
Total liabilities and member's equity $ 1,216,211
------------
------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-2
<PAGE>
MCELROY ELECTRONICS CELLULAR SERVICE AREA
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31,1998
<TABLE>
<S> <C>
Revenues $ 85,264
Operating expenses:
Cellular network maintenance 118,323
Engineering and professional fees 303,000
General and administrative 9,000
Depreciation 113,470
------------
Total operating expenses 543,793
------------
Net loss $ (458,529)
------------
------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-3
<PAGE>
MCELROY ELECTRONICS CELLULAR SERVICE AREA
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31,1998
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss $ (458,529)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 113,470
Changes in operating assets and liabilities
Accounts receivable (32,552)
Prepaid expenses (1,043)
Accounts payable and accrued expenses 19,133
------------
Net cash used in operating activities (359,521)
------------
Cash flows from investing activities:
Purchases of cellular plant and equipment (1,151,473)
------------
Cash flows from financing activities:
Capital contributions 1,563,706
Distributions (52,712)
------------
Net cash provided by financing activities 1,510,994
------------
Net change in cash -
Cash and cash equivalents, beginning of the year -
------------
Cash and cash equivalents, end of the year $ -
------------
------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-4
<PAGE>
MCELROY ELECTRONICS CELLULAR SERVICE AREA
STATEMENT OF MEMBER'S EQUITY
FOR THE YEAR ENDED DECEMBER 31,1998
<TABLE>
<CAPTION>
ALLOCATED
PAID-IN CONTRIBUTED ACCUMULATED
CAPITAL CAPITAL DEFICIT TOTAL
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance at January 1, 1998 $ 415,079 $ - $ (305,333) $ 109,746
Capital contributions 1,502,796 - - 1,502,796
Distributions (52,712) - - (52,712)
Net loss for the period from
January 1, 1998 to December 15, 1998 - - (439,424) (439,424)
Reorganization - December 15, 1998
transfer of allocated paid-in capital
to member's equity (1,865,163) 1,865,163 - -
Capital contributions - 60,910 - 60,910
Net loss for the period from
December 16, 1998 to December 31, 1998 - - (19,105) (19,105)
----------- ----------- ----------- -----------
Balances at December 31, 1998 $ - $ 1,926,073 $ (763,862) $ 1,162,211
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-5
<PAGE>
HICKORY TECH CORP 8-K/A
- ------------------------------------------------------------------------------
1. BASIS OF PRESENTATION AND NATURE OF BUSINESS
BASIS OF PRESENTATION
McElroy Electronics Corporation ("McElroy Electronics"), an S-Corporation
under the Internal Revenue Code ("IRC"), was formed on May 10, 1957. On
March 4, 1997, McElroy Electronics obtained a construction permit
authorizing it to construct Cellular Radio Station KNKR320. On April 2,
1998, McElroy Electronics was issued the cellular radio license (the
"License") to provide service to portions of the Minneapolis-St. Paul,
Minnesota, Metropolitan Statistical Area ("MSA") 15A-2 (the "Market"), a
portion of the Minneapolis-St. Paul, Minnesota MSA previously designated an
"unserved area" by the Federal Communications Commission. Minneapolis
Cellular Telephone Company, LLC (the "LLC") was formed on December 16, 1998
under the laws of the state of Minnesota. Under the Member Control
agreement, McElroy Electronics has a 100% membership interest in the LLC
and is responsible for the daily authority and conduct of the LLC's
operations. Effective December 16, 1998, the McElroy Electronics
transferred the License and all of the assets and liabilities relating to
servicing the License to the LLC. The activity of McElroy Electronics
related to servicing the License from January 1, 1998 to December 15, 1998,
and the activity of the LLC from December 16, 1998 to December 31, 1998,
represent the operations of the McElroy Electronics Cellular Service Area
(the "Company").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CELLULAR PLANT AND EQUIPMENT
Cellular plant and equipment primarily consists of towers and cellular
equipment and is stated at cost, net of accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. The estimated useful life for towers and
cellular equipment is 15 and 5 years, respectively.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews its long-lived assets whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. The
Company estimates the future cash flows expected to result from operations,
and if the sum of the expected undiscounted future cash flows is less than
the carrying amount of the long-lived asset, the Company recognizes an
impairment loss by reducing the depreciated cost of the long-lived asset to
its estimated fair value. To date, the Company has not recognized
impairment on any long-lived assets.
INCOME TAXES
No provision has been recorded for federal and state income taxes since
these taxes are the responsibility of McElroy Electronics' individual
shareholders.
F-6
<PAGE>
HICKORY TECH CORP 8-K/A
- ------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
OPERATING REVENUES
Operating revenues consist of foreign roamer charges that are assessed to
other cellular carriers when their customers use the Company's cellular
network. The Company recognizes revenues as services are rendered. Revenues
earned but unbilled at December 31, 1998 were $32,552 and are included in
accounts receivable. During 1998, the Company distributed all cash received
for these revenues to McElroy Electronics.
CONTRIBUTED CAPITAL
The Company has no employees. McElroy Electronics and outside contractors
provide all cellular maintenance, administration, accounting and other
services. McElroy Electronics allocates to the Company all expenses
directly attributable to the Company's operations. These direct expenses
were $421,323 in 1998. Additionally, McElroy Electronics allocates 5% of
its management and administrative salaries, and 5% of certain general
overhead expenses to the Company. The 5% allocation percentage is based on
management's best estimate of management and employee time dedicated to the
Company in relation to total time incurred. These allocated expenses were
$9,000 in 1998. Since the commencement of operations, McElroy Electronics
has funded the Company's expenses and capital additions. Accordingly, all
amounts funded by McElroy Electronics have been recorded as capital
contributions.
MANAGEMENT ESTIMATES
The presentation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Management has determined the carrying values of financial instruments,
primarily accounts receivable and payable, approximate fair value.
F-7
<PAGE>
HICKORY TECH CORP 8-K/A
- ------------------------------------------------------------------------------
3. CELLULAR PLANT
Cellular plant consists of:
<TABLE>
<S> <C>
Towers $ 224,479
Cellular equipment 1,067,940
-----------
Total, at cost 1,292,419
Less accumulated depreciation (113,470)
-----------
Total, net $ 1,178,949
-----------
-----------
</TABLE>
4. COMMITMENTS
The Company leases cell site locations under operating leases. Rent expense
totaled $49,028 for the year ended December 31, 1998.
Future minimum rental payments required under these operating leases, which
have an initial noncancelable lease term of more than one year, are as
follows:
<TABLE>
<S> <C>
1999 $ 80,659
2000 92,623
2001 88,956
2002 88,956
2003 88,126
-----------
Total $ 439,320
-----------
-----------
</TABLE>
5. SALE AND LOAN ARRANGEMENT
On December 22, 1998, the LLC entered into a Purchase and Sale agreement
(the "Agreement") with Hickory Tech Corporation ("HTC") to sell the License
and the related cellular plant to HTC, subject to a June 1, 1999 closing
date. The Agreement also provided that HTC would assume responsibility for
the construction and management of the cellular network from the date of
the Agreement to the date of closing. Amounts paid by HTC to acquire
cellular equipment and construct the network represented a loan from HTC to
the LLC, which became due on the date of closing (the "HTC Loan"). The sale
price was $37.5 million plus the amount of the HTC Loan. On the closing
date, June 1, 1999, the HTC Loan balance was $4,028,812, and accordingly
the total sale price was $41,528,812. HTC remitted $37.5 million of this
amount in cash, and fulfilled the remaining $4,028,812 sale price by
reducing the HTC Loan balance to $0.
F-8
<PAGE>
HICKORY TECH CORP 8-K/A
- ------------------------------------------------------------------------------
MCELROY ELECTRONICS CELLULAR SERVICE AREA
CONDENSED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
5/31/99
-----------
<S> <C>
ASSETS
CURRENT ASSETS:
Accounts receivable $ 90,102
Prepaid expenses 4,084
----------
TOTAL CURRENT ASSETS 94,186
CELLULAR PLANT & EQUIPMENT, NET 4,921,330
----------
TOTAL ASSETS $5,015,516
----------
----------
LIABILITIES & MEMBER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 188
Loan payable 4,028,812
----------
TOTAL CURRENT LIABILITIES 4,029,000
MEMBER'S EQUITY:
Capital contributions 1,941,622
Accumulated deficit (955,106)
----------
TOTAL MEMBER'S EQUITY 986,516
----------
TOTAL LIABILITIES & MEMBER'S EQUITY $5,015,516
----------
----------
</TABLE>
The accompanying notes are an integral part of the
condensed financial statements.
F-9
<PAGE>
HICKORY TECH CORP 8-K/A
- ------------------------------------------------------------------------------
MCELROY ELECTRONICS CELLULAR SERVICE AREA
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For Five Months Ended
5/31/99 5/31/98
----------- -----------
<S> <C> <C>
OPERATING REVENUES $ 159,146 $ 204
EXPENSES
Operating expenses 87,959 47,818
Depreciation 262,431 42,818
----------- -----------
TOTAL EXPENSES 350,390 90,636
----------- -----------
NET LOSS $ (191,244) $ (90,432)
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of the
condensed financial statements.
F-10
<PAGE>
HICKORY TECH CORP 8-K/A
- ------------------------------------------------------------------------------
MCELROY ELECTRONICS CELLULAR SERVICE AREA
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For Five Months Ended
5/31/99 5/31/98
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (191,244) $ (90,432)
Adjustments to reconcile net loss to net
Cash used in operating activities: 175,695 42,614
---------- ----------
Net cash used in operating activities (15,549) (47,818)
Cash flows from investing activities:
Payments for cellular plant and equipment - (1,044,319)
Cash flows from financing activities:
Capital contributions 117,145 1,092,137
Distributions (101,596) -
---------- ----------
Net cash provided by financing activities 15,549 1,092,137
Net change in cash and cash equivalents - -
---------- ----------
Cash and cash equivalents, beginning of period - -
---------- ----------
Cash and cash equivalents, end of period $ - $ -
---------- ----------
---------- ----------
</TABLE>
Non-cash transactions - During the period from January 1, 1999 through May
31, 1999, the Company financed $4,028,812 of cellular plant additions through
a loan with Hickory Tech Corporation (see Note 2). Hickory Tech Corporation
paid the vendors directly for these cellular plant additions.
The accompanying notes are an integral part of the
condensed financial statements.
F-11
<PAGE>
HICKORY TECH CORP 8-K/A
- ------------------------------------------------------------------------------
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
The preceding unaudited balance sheet, statements of operations 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
McElroy Electronics Corporation ("McElroy Electronics"), an S-Corporation
under the Internal Revenue Code ("IRC"), was formed on May 10, 1957. On
March 4, 1997, McElroy Electronics obtained a construction permit
authorizing it to construct Cellular Radio Station KNKR320. On April 2,
1998, McElroy Electronics was issued the cellular radio license (the
"License") to provide service to portions of the Minneapolis-St. Paul,
Minnesota, Metropolitan Statistical Area ("MSA") 15A-2 (the "Market"), a
portion of the Minneapolis-St. Paul, Minnesota MSA previously designated an
"unserved area" by the Federal Communications Commission. Minneapolis
Cellular Telephone Company, L.L.C. (the "LLC") was formed on December 16,
1998 under the laws of the state of Minnesota. Under the Member Control
agreement, McElroy Electronics has a 100% membership interest in the LLC
and is responsible for the daily authority and conduct of the LLC's
operations. Effective December 16, 1998, McElroy Electronics transferred
the License and all of the assets and liabilities relating to servicing the
License to the LLC. The activity of McElroy Electronics related to
servicing the License from January 1, 1998 to May 31, 1998, and the
activity of the LLC from January 1, 1999 to May 31, 1999, represents the
operations of the McElroy Electronics Cellular Service Area (the
"Company").
2. Sale and Loan Arrangement
On December 22, 1998, the LLC entered into a Purchase and Sale agreement
(the "Agreement") with Hickory Tech Corporation ("HTC") to sell the License
and the related system assets to HTC, subject to a June 1, 1999 closing
date. The Agreement also provided that HTC would assume responsibility for
the construction and management of the cellular network from the date of
the Agreement to the date of closing. Amounts paid by HTC to acquire
cellular equipment and construct the network represented a loan from HTC to
the LLC, which became due on the date of closing (the "HTC Loan"). The sale
price was $37.5 million plus the amount of the HTC Loan. On the closing
date, June 1, 1999, the HTC Loan balance was $4,028,812, and accordingly
the total sale price was $41,528,812. HTC remitted $37.5 million of this
amount in cash, and fulfilled the remaining $4,028,812 sale price by
reducing the HTC Loan balance to $0.
3. 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
financial statements be read in conjunction with the audited financial
statements of McElroy Electronics Cellular Service Area as of December 31,
1998 and for the year then ended included herein.
F-12
<PAGE>
HICKORY TECH CORP 8-K/A
- ------------------------------------------------------------------------------
HICKORY TECH CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
On June 1, 1999, Hickory Tech Corporation (HTC) completed an asset purchase
agreement with Minneapolis Cellular Telephone Company, LLC, an entity wholly
owned by McElroy Electronics Corporation. The assets purchased are described
in this document as McElroy Electronics Cellular Service Area (McElroy
Cellular).
The unaudited pro forma condensed financial statements as of December 31,
1998 and for the five month period ended May 31, 1999 and year ended December
31, 1998 were prepared using the purchase method of accounting, assuming the
acquisition occurred on the date of the balance sheet or as of January 1,
1998, 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 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
McElroy Cellular 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, evaluations and other studies of the fair market value of McElroy
Cellular 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 CORP 8-K/A
- ------------------------------------------------------------------------------
HICKORY TECH CORPORATION
PRO FORMA CONDENSED BALANCE SHEET
AS OF MAY 31, 1999
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Hickory Tech McElroy Electronics Pro Forma Pro Forma
Corporation Cellular Service Area Adjustments Results
------------ ---------------------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 8,190 $ -- $ (4,635)(a) $ 3,555
Accounts receivable 19,196 90 (4,119)(a,b) 15,167
Inventories 2,730 -- -- 2,730
Deferred tax benefit and other 1,857 4 (4)(b) 1,857
--------- --------- ---------- --------
TOTAL CURRENT ASSETS 31,973 94 (8,758) 23,309
INVESTMENTS 779 -- -- 779
PROPERTY, PLANT & EQUIPMENT, NET 66,907 4,922 -- 71,829
INTANGIBLE ASSETS, NET 65,049 -- 36,607 (c) 101,656
OTHER 3,504 -- (2,865)(a) 639
--------- --------- ---------- --------
TOTAL ASSETS $ 168,212 $ 5,016 $ 24,984 $198,212
--------- --------- ---------- --------
--------- --------- ---------- --------
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 6,194 $ 4,029 $ (4,029)(b) $ 6,194
Accrued interest 506 -- -- 506
Accrued taxes 4,425 -- -- 4,425
Advanced billings & deposits 2,791 -- -- 2,791
Current maturities of long-term debt 683 -- -- 683
--------- --------- ---------- --------
TOTAL CURRENT LIABILITIES 14,599 4,029 (4,029) 14,599
LONG-TERM DEBT, NET OF CURRENT MATURITIES 74,256 -- 30,000 (a) 104,256
DEFERRED INCOME TAXES 3,985 -- -- 3,985
DEFERRED COMPENSATION AND OTHER 2,548 -- -- 2,548
SHAREHOLDERS' EQUITY:
Common stock 1,374 -- -- 1,374
Additional paid-in capital 3,149 1,942 (1,942)(d) 3,149
Reinvested earnings 68,301 (955) 955 (d) 68,301
--------- --------- ---------- --------
TOTAL SHAREHOLDERS' EQUITY 72,824 987 (987) 72,824
--------- --------- ---------- --------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 168,212 $ 5,016 $ 24,984 $198,212
--------- --------- ---------- --------
--------- --------- ---------- --------
</TABLE>
See accompanying notes to unaudited pro forma condensed financial statements.
PF-2
<PAGE>
HICKORY TECH CORP 8-K/A
- ------------------------------------------------------------------------------
HICKORY TECH CORPORATION
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
(In thousands, except per-share data)
<TABLE>
<CAPTION>
Hickory Tech McElroy Electronics Pro Forma Pro Forma
Corporation Cellular Service Area Adjustments Results
------------ ---------------------- ----------- ----------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Local exchange telephone $ 48,352 $ -- $ -- $ 48,352
Communications services 9,538 85 -- 9,623
Billing/Data services 7,962 -- -- 7,962
Communications products 28,721 -- -- 28,721
--------- --------- ---------- --------
TOTAL OPERATING REVENUES 94,573 85 -- 94,658
COSTS AND EXPENSES
Cost of sales 24,268 -- -- 24,268
Operating expenses 35,888 430 (i) -- 36,318
Depreciation 8,021 113 -- 8,134
Amortization of intangibles 1,704 -- 915 (e) 2,619
--------- --------- ---------- --------
TOTAL COSTS AND EXPENSES 69,881 543 915 71,339
--------- --------- ---------- --------
OPERATING INCOME 24,692 (458) (915) 23,319
OTHER INCOME 1,445 -- -- 1,445
GAIN ON SALE OF ASSETS 1,278 -- -- 1,278
INTEREST EXPENSE (4,596) -- (1,953)(f) (6,549)
--------- --------- ---------- --------
INCOME BEFORE INCOME TAXES 22,819 (458) (2,868) 19,493
INCOME TAXES 9,293 -- (1,354)(g) 7,939
--------- --------- ---------- --------
CONSOLIDATED NET INCOME $ 13,526 $ (458) $ (1,514) $ 11,554
--------- --------- ---------- --------
--------- --------- ---------- --------
BASIC EARNINGS PER SHARE $ 0.99 $ 0.85(h)
--------- --------
DILUTED EARNINGS PER SHARE $ 0.99 $ 0.84(h)
--------- --------
</TABLE>
See accompanying notes to unaudited pro forma condensed financial statements.
PF-3
<PAGE>
HICKORY TECH CORP 8-K/A
- ------------------------------------------------------------------------------
HICKORY TECH CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE FIVE MONTHS ENDED MAY 31, 1999
(UNAUDITED)
(In thousands, except per-share data)
<TABLE>
<CAPTION>
Hickory Tech McElroy Electronics Pro Forma Pro Forma
Corporation Cellular Service Area Adjustments Results
------------ ---------------------- ----------- ----------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Local exchange telephone $ 20,558 $ -- $ -- $ 20,558
Communications services 6,047 159 -- 6,206
Billing/Data services 1,843 -- -- 1,843
Communications products 9,863 -- -- 9,863
--------- --------- ---------- --------
TOTAL OPERATING REVENUES 38,311 159 -- 38,470
COSTS AND EXPENSES
Cost of sales 9,554 -- -- 9,554
Operating expenses 15,711 88 (i) -- 15,799
Depreciation 3,612 262 -- 3,874
Amortization of intangibles 810 -- 381 (e) 1,191
--------- --------- ---------- --------
TOTAL COSTS AND EXPENSES 29,687 350 381 30,418
--------- --------- ---------- --------
OPERATING INCOME (LOSS) 8,624 (191) (381) 8,052
OTHER INCOME 762 -- -- 762
GAIN ON SALE OF ASSETS 9,207 -- -- 9,207
INTEREST EXPENSE (2,034) -- (814)(f) (2,848)
--------- --------- ---------- --------
INCOME BEFORE INCOME TAXES 16,559 (191) (1,195) 15,173
INCOME TAXES 7,008 -- (564)(g) 6,444
--------- --------- ---------- --------
CONSOLIDATED NET INCOME $ 9,551 $ (191) $ (631) $ 8,729
--------- --------- ---------- --------
--------- --------- ---------- --------
BASIC EARNINGS PER SHARE $ 0.70 $ 0.64(h)
--------- --------
DILUTED EARNINGS PER SHARE $ 0.69 $ 0.63(h)
--------- --------
</TABLE>
See accompanying notes to unaudited pro forma combined
condensed financial statements.
PF-4
<PAGE>
HICKORY TECH CORP 8-K/A
- ------------------------------------------------------------------------------
HICKORY TECH CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
(a) To record the amount of cash and line of credit used to finance the
acquisition. Total purchase price was $41.5 million, and consisted of
the following:
<TABLE>
<S> <C>
Cash paid upon June 1, 1999 closing $ 4,635
Deposit remitted in 1998 2,865
Amount financed with line of credit 30,000
Settlement of HTC Loan to McElroy Cellular 4,029
--------
Total $ 41,529
</TABLE>
(b) To record the settlement of the HTC Loan to McElroy Cellular upon the
purchase, and to eliminate McElroy Cellular assets not transferred to
HTC upon the purchase.
(c) To record the value of the cellular license acquired by HTC. HTC will
amortize this license on a straight-line basis over a period of 40
years.
(d) To eliminate McElroy Cellular's equity balances.
(e) To record amortization expense on the cellular license acquired.
(f) To increase interest expense by applying HTC's effective borrowing
rate of 6.51% on the line of credit obtained to finance the
acquisition.
(g) To record the income tax benefit resulting from lower earnings due to
increased amortization expense and interest expense.
(h) Earnings per share is calculated using HTC's historical weighted
average shares outstanding of 13,637,000 and fully diluted shares of
13,686,000 for the year ended December 31, 1998 and historical
weighted average shares outstanding of 13,714,000 and fully diluted
shares of 13,758,000 for the five month period ended May 31, 1999.
(i) McElroy Electronics Corporation provided McElroy Cellular with general
management and administrative services, and certain other services.
These costs were allocated to McElroy Cellular using allocation
methodologies which McElroy Electronics Corporation management
believes represent McElroy Cellular's proportionate share of these
costs. 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-5
