<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTIONS 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): December 14, 1994
VANGUARD CELLULAR SYSTEMS, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
NORTH CAROLINA 0-16560 56-1549590
(State or other Jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification No.)
</TABLE>
<TABLE>
<S> <C>
2002 PISGAH CHURCH ROAD, SUITE 300, GREENSBORO, NC 27455
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (910) 282-3690
</TABLE>
<PAGE>
ITEM 5. OTHER EVENTS.
This report is being filed to present revised pro forma financial
information with respect to pending acquisitions previously reported.
The following unaudited pro forma consolidated financial information of
Vanguard Cellular Systems, Inc. and Subsidiaries (the Registrant) gives effect
to the following acquisitions:
A. The acquisition of a 100% ownership interest in Crowley Cellular
Telecommunications Binghamton, Inc. (Crowley Inc.) (the "Crowley
Transaction"). On December 14, 1994, the Registrant purchased the stock of
Crowley Inc., the owner of the cellular system serving the Elmira, New York
MSA and also a 97% interest in Binghamton CellTelCo, an operating cellular
partnership serving the Binghamton, New York MSA. The purchase price for this
acquisition was 1,766,674 shares of the Registrant's Class A Common Stock and
$6.1 million in cash, subject to certain post-closing adjustments. The cash
was borrowed under the Registrant's 1993 Loan Agreement.
B. The purchase of the assets of Sunshine Cellular (Sunshine) (the "Sunshine
Transaction"). Sunshine owns and operates the cellular system serving the
Union, Pennsylvania (PA-8) RSA. The purchase price for the assets of Sunshine
is $50.4 million, subject to certain closing adjustments. Of the total
purchase price, $15 million must be paid in cash and the remainder is
payable, at the Registrant's option, in cash or Class A Common Stock of the
Registrant, or any combination thereof. The following financial information
assumes that the Sunshine Transaction is made with cash borrowed under the
Registrant's 1993 Loan Agreement.
In order to consummate the Sunshine Transaction, the Registrant must obtain
a waiver under its loan agreement entered into in 1993 with various lenders led
by the Bank of New York and Toronto Dominion Bank (the "1993 Loan Agreement") or
obtain alternative financing. Although the Registrant has received commitments
to refinance the 1993 Loan Agreement with a new $675 million bank credit
facility, there can be no assurance that such financing or any necessary waiver
will be obtained. The Registrant presently expects to finance the Sunshine
Transaction with funds borrowed under its existing 1993 Loan Agreement or, if
available, its new proposed facility.
The unaudited pro forma consolidated statements of operations give effect
to the Crowley Transaction and the Sunshine Transaction as if they had occurred
on January 1, 1993, and the unaudited pro forma balance sheet data gives effect
to the Crowley Transaction and the Sunshine Transaction as if they had occurred
on September 30, 1994.
The unaudited pro forma consolidated financial information does not reflect
the Registrant's exchange of the Hagerstown, MD MSA for the PA-10 East RSA or
the acquisition of the Altoona, PA MSA prior to the consummation of these
transactions in April 1994. The acquisitions of the ME-4 RSA and WV-1 RSA, which
were consummated in October 1994, are also excluded. The excluded acquisitions
did not involve businesses that are significant under Regulation S-X.
The unaudited pro forma consolidated financial information has been
prepared by the Registrant based upon the historical financial statements of the
Registrant, Crowley, Inc. and Sunshine. The unaudited pro forma consolidated
financial information gives effect to the acquisitions under the purchase method
of accounting and to certain assumptions and adjustments described more fully in
the accompanying notes. This unaudited pro forma consolidated financial
information may not be indicative of the results that actually would have
occurred if the transactions had been completed on the dates indicated or of the
results which may be obtained in the future. The unaudited pro forma
consolidated financial information should be read in conjunction with the
financial statements and notes thereto for the Registrant included in its Form
10-K for the year ended December 31, 1993 and the Form 10-Q for the period ended
September 30, 1994 and financial statements and notes thereto of Crowley, Inc.
and Sunshine included the Company's Form 8-K dated November 22, 1994.
1
<PAGE>
VANGUARD CELLULAR SYSTEMS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEETS -- SEPTEMBER 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
VANGUARD
CELLULAR
SYSTEMS, INC. ACQUIRED PRO FORMA
(AMOUNTS IN THOUSANDS) AND SUBSIDIARIES ENTITIES (1) ADJUSTMENTS
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash........................................................... $ 5,515 $ 754 $ 0
Accounts receivable, net....................................... 19,498 1,787 0
Cellular telephone inventories................................. 5,946 474 0
Prepaid expenses............................................... 759 90 0
Other.......................................................... 0 514 (514)(7)
Total current assets........................................ 31,718 3,619 (514)
INVESTMENTS...................................................... 209,080 8,394 75,680(8)
PROPERTY AND EQUIPMENT, net...................................... 96,367 9,863 0
OTHER ASSETS, net................................................ 9,732 643 7,161(8)
Total assets................................................ $ 346,897 $ 22,519 $ 82,327
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt.............................. $ 0 $ 2,600 $ (2,600)(9)
Accounts payable and accrued expenses.......................... 26,411 1,132 (339)(8)
Customer deposits and unearned revenues........................ 551 188 (21)(8)
Total current liabilities................................... 26,962 3,920 (2,960)
LONG-TERM DEBT, net of current portion........................... 302,647 18,025 38,376(9)
MINORITY INTERESTS............................................... 2,548 85 0
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock (38,594 actual and 40,404 pro forma
shares outstanding)......................................... 386 1 (1)(8)
18(10)
Additional capital in excess of par value...................... 186,724 16,628 (16,628)(8)
47,382(10)
Net unrealized holding losses.................................. (3,537) 0 0
Accumulated deficit............................................ (168,833) (16,140) 16,140(8)
Total shareholders' equity.................................. 14,740 489 46,911
Total liabilities and shareholders' equity.................. $ 346,897 $ 22,519 $ 82,327
<CAPTION>
PRO FORMA
(AMOUNTS IN THOUSANDS) CONSOLIDATED
<S> <C>
ASSETS
CURRENT ASSETS:
Cash........................................................... $ 6,269
Accounts receivable, net....................................... 21,285
Cellular telephone inventories................................. 6,420
Prepaid expenses............................................... 849
Other.......................................................... 0
Total current assets........................................ 34,823
INVESTMENTS...................................................... 293,154
PROPERTY AND EQUIPMENT, net...................................... 106,230
OTHER ASSETS, net................................................ 17,536
Total assets................................................ $ 451,743
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt.............................. $ 0
Accounts payable and accrued expenses.......................... 27,204
Customer deposits and unearned revenues........................ 718
Total current liabilities................................... 27,922
LONG-TERM DEBT, net of current portion........................... 359,048
MINORITY INTERESTS............................................... 2,633
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock (38,594 actual and 40,404 pro forma
shares outstanding)......................................... 404
Additional capital in excess of par value...................... 234,106
Net unrealized holding losses.................................. (3,537)
Accumulated deficit............................................ (168,833)
Total shareholders' equity.................................. 62,140
Total liabilities and shareholders' equity.................. $ 451,743
</TABLE>
The accompanying notes to pro forma condensed financial information are an
integral part of this statement.
2
<PAGE>
VANGUARD CELLULAR SYSTEMS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
VANGUARD
CELLULAR
SYSTEMS, INC. ACQUIRED PRO FORMA
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) AND SUBSIDIARIES ENTITIES (1) ADJUSTMENTS
<S> <C> <C> <C>
REVENUES:
Service Fees................................................... $ 98,960 $ 7,569 $ 0
Cellular telephone equipment revenues.......................... 9,929 1,083 0
Other.......................................................... 175 0 0
109,064 8,652 0
COSTS AND EXPENSES:
Cost of service................................................ 14,461 1,768 0
Cost of cellular telephone equipment........................... 13,410 1,482 0
Marketing and selling.......................................... 21,693 1,502 0
General and administrative..................................... 34,218 3,049 0
Depreciation and amortization.................................. 25,160 2,120 2,143(2)
108,942 9,921 2,143
INCOME (LOSS) FROM OPERATIONS.................................... 122 (1,269) (2,143)
NET LOSSES ON DISPOSITIONS....................................... (657) 0 0
INTEREST EXPENSE................................................. (15,389) (1,358) (2,950)(3)
1,358(4)
OTHER, net....................................................... 795 605 0
LOSS BEFORE MINORITY INTEREST.................................... (15,129) (2,022) (3,735)
MINORITY INTEREST................................................ (154) 8 0
NET LOSS BEFORE EXTRAORDINARY ITEM............................... $(15,283) $ (2,014) $(3,735)
NET LOSS PER SHARE BEFORE EXTRAORDINARY ITEM..................... $ (0.40)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (6)......... 37,888
<CAPTION>
PRO FORMA
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) CONSOLIDATED
<S> <C>
REVENUES:
Service Fees................................................... $106,529
Cellular telephone equipment revenues.......................... 11,012
Other.......................................................... 175
117,716
COSTS AND EXPENSES:
Cost of service................................................ 16,229
Cost of cellular telephone equipment........................... 14,892
Marketing and selling.......................................... 23,195
General and administrative..................................... 37,267
Depreciation and amortization.................................. 29,423
121,006
INCOME (LOSS) FROM OPERATIONS.................................... (3,290)
NET LOSSES ON DISPOSITIONS....................................... (657)
INTEREST EXPENSE................................................. (18,339)
OTHER, net....................................................... 1,400
LOSS BEFORE MINORITY INTEREST.................................... (20,886)
MINORITY INTEREST................................................ (146)
NET LOSS BEFORE EXTRAORDINARY ITEM............................... $(21,032)
NET LOSS PER SHARE BEFORE EXTRAORDINARY ITEM..................... $ (0.53)(5)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (6)......... 39,665
</TABLE>
The accompanying notes to pro forma condensed financial information are an
integral part of this statement.
3
<PAGE>
VANGUARD CELLULAR SYSTEMS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
HISTORICAL
VANGUARD
CELLULAR
SYSTEMS, INC. ACQUIRED PRO FORMA
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) AND SUBSIDIARIES ENTITIES (1) ADJUSTMENTS
<S> <C> <C> <C>
REVENUES:
Service Fees................................................... $104,076 $ 8,185 $ 0
Cellular telephone equipment revenues.......................... 12,246 925 0
Other.......................................................... 2,241 0 0
118,563 9,110 0
COSTS AND EXPENSES:
Cost of service................................................ 15,934 1,673 0
Cost of cellular telephone equipment........................... 19,219 1,296 0
Marketing and selling.......................................... 23,970 1,295 0
General and administrative..................................... 31,220 2,304 0
Depreciation and amortization.................................. 17,359 1,559 703(2)
107,702 8,127 703
INCOME FROM OPERATIONS........................................... 10,861 983 (703)
NET LOSSES ON DISPOSITIONS....................................... (212) 0 0
INTEREST EXPENSE................................................. (15,113) (1,184) (2,636)(3)
1,184(4)
OTHER, net....................................................... 70 402 0
LOSS BEFORE MINORITY INTEREST.................................... (4,394) 201 (2,155)
MINORITY INTEREST................................................ (167) (13) 0
NET LOSS......................................................... $ (4,561) $ 188 $(2,155)
NET LOSS PER SHARE............................................... $ (0.12)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (6)......... 38,477
<CAPTION>
PRO FORMA
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) CONSOLIDATED
<S> <C>
REVENUES:
Service Fees................................................... $112,261
Cellular telephone equipment revenues.......................... 13,171
Other.......................................................... 2,241
127,673
COSTS AND EXPENSES:
Cost of service................................................ 17,607
Cost of cellular telephone equipment........................... 20,515
Marketing and selling.......................................... 25,265
General and administrative..................................... 33,524
Depreciation and amortization.................................. 19,621
116,532
INCOME FROM OPERATIONS........................................... 11,141
NET LOSSES ON DISPOSITIONS....................................... (212)
INTEREST EXPENSE................................................. (17,749)
OTHER, net....................................................... 472
LOSS BEFORE MINORITY INTEREST.................................... (6,348)
MINORITY INTEREST................................................ (180)
NET LOSS......................................................... $ (6,528)
NET LOSS PER SHARE............................................... $ (0.16)(5)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (6)......... 40,244
</TABLE>
The accompanying notes to pro forma condensed financial information are an
integral part of this statement.
4
<PAGE>
VANGUARD CELLULAR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
For purposes of determining the pro forma effects on the consolidated
statement of operations for the year ended December 31, 1993 and the nine months
ended September 30, 1994, the pro forma adjustments and eliminations have been
made as if the Crowley Transaction and the Sunshine Transaction had occurred on
January 1, 1993. For the purposes of determining the pro forma effects on the
condensed consolidated balance sheet as of September 30, 1994, the pro forma
adjustments and eliminations have been made as if the Crowley Transaction and
the Sunshine Transaction had occurred on September 30, 1994. The following pro
forma adjustments have been made:
(1) These amounts reflect the combined historical data of Crowley, Inc. and
Sunshine as of or for the periods indicated, reclassified to conform
with the presentation of the Registrant's financial statements.
(2) This adjustment reflects additional amortization of deferred cellular
license acquisition costs and the acquired customer base arising from
the acquisitions of Crowley, Inc. and Sunshine. The deferred cellular
license acquisition costs are being amortized over 40 years in
accordance with the Registrant's policy. The cost of the acquired
customer base is being amortized over the expected service period for
these customers which is estimated to be approximately four years.
(3) This adjustment reflects interest expense attributable to the $55.4
million of borrowings that would have been necessary to consummate the
acquisitions on January 1, 1993. The adjustment assumes the borrowings
would be funded from the Facility B Loan of the Registrant's credit
agreement and would bear interest at the Eurodollar Rate plus 2.5%. For
the year ended December 31, 1993 and for the nine months ended
September 30, 1994, the average Eurodollar rate was 3.32% and 4.34%,
respectively. This additional interest expense is offset by a reduction
in the commitment fee equal to .5% of the borrowings. If the assumed
rate varied by 1/8% in each period, consolidated interest expense on
all outstanding borrowings of the Registrant in each period for the
year ended December 31, 1993 and for the nine months ended September
30, 1994, would have varied by approximately $340,000 and $310,000,
respectively.
(4) This adjustment eliminates interest expense incurred by Crowley, Inc.
and Sunshine during the year ended December 31, 1993 and the nine
months ended September 30, 1994 of $1.4 million and $1.2 million,
respectively. This interest expense relates to long-term debt of
Crowley, Inc. that will be retired prior to the Crowley Transaction and
long-term debt of Sunshine that will not be assumed by the Registrant.
(5) The pro forma net loss per share is computed based on the weighted
average shares outstanding adjusted for the additional shares issued to
fund part of the Crowley Transaction.
(6) Reflects 3 for 2 stock split effected in the form of a 50% stock
dividend paid on August 24, 1994.
(7) This adjustment reflects the required settlement of "due from
affiliate" of Crowley Inc. prior to the consummation of the Crowley
Transaction.
(8) These adjustments reflect the consummation of the Crowley Transaction
and the Sunshine Transaction, the allocation of the purchase prices,
the elimination of certain liabilities not assumed from Sunshine and
the consolidation of Crowley Inc. and Sunshine as if the acquisitions
had occurred on September 30, 1994.
(9) This adjustment reflects additional borrowings of $56.4 million under
the Registrant's 1993 Loan Agreement incurred primarily to fund these
transactions. Additionally, this adjustment also reflects (i) the
retirement of $8.6 million of Crowley, Inc. long-term debt (including
current portion) which will occur prior to the consummation of the
Crowley Transaction and (ii) the elimination of $11.8 million of
Sunshine long-term debt (including current portion) that will not be
assumed in the Sunshine Transaction.
(10) This adjustment reflects the issuance of the Registrant's Class A
Common Stock to fund part of the Crowley Transaction.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) and (b) No financial statements or pro forma financial information with
respect to acquired businesses are included herewith. Pro forma information with
respect to the pending acquisitions of Crowley, Inc. and Sunshine is included in
Item 5
5
<PAGE>
VANGUARD CELLULAR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION -- CONTINUED
hereof. Historical financial information with respect to these transaction was
included in the Registrant's Form 8-K dated November 22, 1994.
(c) The Exhibits furnished in connection with this report are as follows:
2(a) Stock Purchase Agreement by and among Crowley Cellular
Telecommunications Limited Partnership, Crowley Cellular Telecommunications
Binghamton, Inc. and Vanguard Cellular Systems, Inc., dated as of August 5,
1994 and filed as Exhibit 2(a) to the Registrant's Form 10-Q for the
quarter ended June 30, 1994, is incorporated by reference herein.
2(b) Asset Purchase Agreement dated September 26, 1994 by and between
Vanguard Cellular Systems, Inc. and Sunshine Cellular ("Sunshine
Agreement") filed as Exhibit 2(b) to the Registrant's Current Report on
Form 8-K filed on September 30, 1994, is incorporated by reference herein.
6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
VANGUARD CELLULAR SYSTEMS, INC.
By: /s/ Stephen L. Holcombe
STEPHEN L. HOLCOMBE
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
Date: December 14, 1994
7
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. PAGE
<C> <S> <C>
*2(a) Stock Purchase Agreement by and among Crowley Cellular Telecom-
munications Limited Partnership, Crowley Cellular Telecommunications
Binghamton, Inc. and Vanguard Cellular Systems, Inc., dated as of August
5, 1994 and filed as Exhibit 2(a) to the Registrant's Form 10-Q for the
quarter ended June 30, 1994.
*2(b) Asset Purchase Agreement dated September 26, 1994 by and between
Vanguard Cellular Systems, Inc. and Sunshine Cellular ("Sunshine
Agreement") filed as Exhibit 2(b) to the Registrant's Current Report
on Form 8-K filed on September 30, 1994.
</TABLE>
* Incorporated by reference to the statement or report indicated.
8
