<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
(Amendment No. 5)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: August 16, 1993
McCAW CELLULAR COMMUNICATIONS, INC.
A Delaware Commission File I.R.S. Employer
Corporation No. 1-9854 No. 91-1379052
5400 Carillon Point, Kirkland, Washington 98033
Telephone Number (206) 827-4500
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Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial statements of businesses to be merged.
(1) Report of Independent Auditors.*
(2) AT&T's Consolidated Statements of Income for the
Years Ended December 31, 1993, 1992 and 1991.*
(3) AT&T's Consolidated Balance Sheets at December 31,
1993 and 1992.*
(4) AT&T's Consolidated Statements of Cash Flows for
the Years Ended December 31, 1993, 1992 and 1991.*
(5) AT&T's Notes to Consolidated Financial Statements,
December 31, 1993.*
(6) AT&T's Consolidated Statements of Income for the
Six Months Ended June 30, 1994 and 1993.
(7) AT&T's Consolidated Balance Sheets at June 30, 1994
and December 31, 1993.
(8) AT&T's Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 1994 and 1993.
(9) AT&T's Notes to Consolidated Financial Statements,
June 30, 1994.
(b) Pro Forma Financial Information.
(1) Unaudited Pro Forma Combined Statement of Income
for the Year Ended December 31, 1993*
(2) Unaudited Pro Forma Combined Statement of Income
for the Year Ended December 31, 1992*
(3) Unaudited Pro Forma Combined Statement of Income
for the Year Ended December 31, 1991*
(4) Unaudited Pro Forma Combined Balance Sheet at
December 31, 1993*
(5) Notes to Unaudited Pro Forma Combined Financial
Statements*
(6) Unaudited Pro Forma Combined Statement of Income
for the six Months Ended June 30, 1994.
(7) Unaudited Pro Forma Combined Statement of Income
for the Six Months Ended June 30, 1993.
(8) Unaudited Pro Forma Combined Balance Sheet at June
30, 1994.
(9) Notes to Unaudited Pro Forma Combined Financial
Statements.
- ----------------------
* Previously filed.<PAGE>
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(c) Exhibits.
Exhibits identified in parentheses below, on file with
the Securities and Exchange Commission, are incorporated
herein by reference as exhibits hereto.
Exhibit
Number
2(a) Agreement and Plan of Merger, dated August 16,
1993, among AT&T, Ridge Merger Corporation and the
Company (incorporated by reference to Exhibit 2(a)
to the Company's quarterly report on Form 10-Q for
the quarter ended June 30, 1993, as amended).
99(a) Agreement, dated as of August 16, 1993, among
AT&T, Craig O. McCaw, John E. McCaw, Jr., Bruce R.
McCaw and Keith W. McCaw, et al (incorporated by
reference to Exhibit 99(a) to the Company's
quarterly report on Form 10-Q for the quarter
ended June 30, 1993, as amended).
99(b) Press Release, dated August 16, 1993 (incorporated
by reference to Exhibit 99(b) to the Company's
quarterly report on Form 10-Q for the quarter
ended June 30, 1993, as amended).
99(c) Letter, dated August 16, 1993, from American
Telephone and Telegraph Company to McCaw Cellular
Communications, Inc. (incorporated by reference to
Exhibit 99(c) to the Company's quarterly report on
Form 10-Q for the quarter ended June 30, 1993, as
amended).
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PART I - FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
For the Three For the Six
Months Ended Months Ended
June 30 June 30
1994 1993(b) 1994 1993(b)
Sales and Revenues
Telecommunications services..... $10,335 $ 9,833 $20,559 $19,800
Sales of products and systems... 4,979 4,175 9,049 7,729
Rentals and other services...... 1,692 1,720 3,267 3,348
Financial services and leasing.. 723 588 1,414 1,158
Total revenues.................. 17,729 16,316 34,289 32,035
Costs (c)
Telecommunications services
Access and other
interconnection costs....... 4,465 4,387 8,984 8,844
Other costs................... 1,748 1,690 3,489 3,526
Total telecommunications
services...................... 6,213 6,077 12,473 12,370
Products and systems............ 3,099 2,563 5,539 4,632
Rentals and other services...... 817 785 1,591 1,573
Financial services and leasing.. 499 403 951 780
Total costs..................... 10,628 9,828 20,554 19,355
Gross margin.................... 7,101 6,488 13,735 12,680
Operating Expenses (c)
Selling, general and
administrative expenses....... 4,490 4,341 8,592 8,258
Research and development
expenses...................... 703 740 1,461 1,487
Total operating expenses........ 5,193 5,081 10,053 9,745
Operating income................ 1,908 1,407 3,682 2,935
Other income - net (d).......... 65 278 184 421
Interest expense................ 134 111 263 313
Income before income taxes and
cumulative effects of
accounting changes............ 1,839 1,574 3,603 3,043
Provision for income taxes...... 709 569 1,379 1,102
Income before cumulative
effects of accounting changes. 1,130 1,005 2,224 1,941
(CONT'D)
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PART I - FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF INCOME (CONT'D)
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
For the Three For the Six
Months Ended Months Ended
June 30 June 30
1994 1993(b) 1994 1993(b)
Cumulative effects on prior years
of changes in accounting for:
Postretirement benefits (net of
income taxes of $4,294) (e)... 0 0 0 (7,023)
Postemployment benefits (net of
income taxes of $ 681) (e).... 0 0 0 (1,128)
Income taxes (e)................ 0 0 0 383
Cumulative effects of
accounting changes............ 0 0 0 (7,768)
Net Income (Loss)............... $1,130 $1,005 $2,224 $(5,827)
Weighted average common shares
outstanding (millions)........ 1,363 1,352 1,361 1,350
Per Common Share:
Income before cumulative effects
of accounting changes......... $ .83 $ .74 $ 1.63 $ 1.44
Cumulative effects of accounting
changes....................... - - - (5.76)
Net Income (Loss)............... $ .83 $ .74 $ 1.63 $ (4.32)
Dividends declared per
common share.................. $ .33 $ .33 $ .66 $ .66
See Notes to Consolidated Financial Statements.
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PART I - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions Except Per Share Amount)
(Unaudited)
June 30, December 31,
1994 1993
ASSETS
Cash and temporary cash investments.... $ 967 $ 532
Receivables less allowances
of $1,062 and $1,003
Accounts receivable.................. 12,118 11,933
Finance receivables.................. 12,492 11,370
Inventories (f)........................ 3,972 3,187
Deferred income taxes.................. 2,230 2,079
Other current assets................... 975 637
Total current assets................... 32,754 29,738
Property, plant and equipment, net of
accumulated depreciation of $21,939
and $21,496.......................... 19,133 19,397
Investments............................ 1,237 1,503
Finance receivables.................... 4,099 3,815
Prepaid pension costs.................. 3,893 3,576
Other assets........................... 3,159 2,737
TOTAL ASSETS........................... $64,275 $60,766
(CONT'D)
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PART I - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS (CONT'D)
(Dollars in Millions Except Per Share Amount)
(Unaudited)
June 30, December 31,
1994 1993
LIABILITIES AND DEFERRED CREDITS
Accounts payable........................ $ 5,353 $ 4,694
Payroll and benefit-related liabilities. 3,431 3,746
Postretirement and postemployment
benefit-related liabilities............ 1,188 1,301
Debt maturing within one year........... 9,213 10,904
Dividends payable....................... 449 448
Other current liabilities............... 4,737 4,241
Total current liabilities............... 24,371 25,334
Long-term debt including capital
leases................................ 9,114 6,812
Postretirement and postemployment
benefit related liabilities........... 8,981 9,082
Other liabilities....................... 4,371 4,298
Deferred income taxes................... 484 275
Unamortized investment tax credits...... 245 270
Other deferred credits.................. 432 263
Total liabilities & deferred credits.... 47,998 46,334
Minority interests...................... 618 582
SHAREOWNERS' EQUITY
Common stock - par value $1 per share... 1,360 1,352
Authorized shares: 2,000,000,000
Outstanding shares:
1,359,950,000 at June 30, 1994
1,352,398,000 at December 31, 1993
Additional paid-in capital.............. 12,413 12,028
Guaranteed ESOP obligation.............. (331) (355)
Foreign currency translation
adjustments........................... 50 (32)
Retained earnings....................... 2,167 857
Total shareowners' equity............... 15,659 13,850
TOTAL LIABILITIES/SHAREOWNERS' EQUITY... $64,275 $60,766
See Notes to Consolidated Financial Statements.
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PART I - FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
(Unaudited)
For the Six
Months Ended
June 30,
1994 1993
Operating Activities
Net income (loss)........................ $ 2,224 $(5,827)
Adjustments to reconcile net income to
net cash provided by operating
activities:
Cumulative effects of accounting
changes (e)......................... - 7,768
Depreciation.......................... 1,762 1,776
Provision for uncollectibles.......... 849 835
(Increase) in accounts receivable..... (756) (162)
(Increase) in inventories............. (762) (736)
Increase (Decrease)in accounts
payable............................. 629 (227)
Net change in other operating
assets and liabilities.............. (584) (171)
Other adjustments for non-cash
items - net......................... 56 (121)
Net cash provided by operating
activities............................. 3,418 3,135
Investing Activities
Capital expenditures net of proceeds
from sale or disposal of property,
plant and equipment of $132 and $140. (1,375) (1,489)
(Increase) in finance receivables, net
of lease-related repayments of $1,854
and $1,910........................... (1,393) (1,085)
Net (increase) in investments.......... (73) (558)
Acquisitions, net of cash acquired..... (149) (250)
Other investing activities - net....... 5 (134)
Net cash used in investing activities.... (2,985) (3,516)
Financing Activities
Proceeds from long-term debt issuance.. 3,248 1,253
Retirements of long-term debt.......... (531) (2,395)
Issuance of common shares.............. 392 318
Treasury shares acquired............... (2) (1)
Dividends paid......................... (900) (884)
(Decrease) increase in short-term
borrowings - net..................... (2,183) 1,327
Other financing activities - net....... (33) 20
Net cash used in financing activities.... (9) (362)
(CONT'D)
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PART I - FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D)
(Dollars in Millions)
(Unaudited)
For the Six
Months Ended
June 30,
1994 1993
Effect of exchange rate
changes on cash........................ $ 11 $ 36
Net increase (decrease) in cash and
temporary cash investments............. 435 (707)
Cash and temporary cash investments
at beginning of year................... 532 1,310
Cash and temporary cash investments
at end of period....................... $ 967 $ 603
See Notes to Consolidated Financial Statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
(a) ACCOUNTING POLICIES - The consolidated financial statements have been
prepared by AT&T Corp. ("AT&T" or the "Company") pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC") and,
in the opinion of management, include all adjustments, consisting of
only normal recurring adjustments, necessary for a fair presentation
of the consolidated results of operations, financial position and cash
flows for each period presented. The consolidated financial statements
include the accounts of foreign entities based on their fiscal years,
which end either November 30 or December 31. The consolidated results
for interim periods are not necessarily indicative of results for the
full year. These financial statements should be read in conjunction
with AT&T's 1993 Annual Report to Shareowners and Form 10-K for the
year ended December 31, 1993 and the current year's previously issued
Form 10-Q.
(b) RESTATEMENTS AND RECLASSIFICATIONS - Previously reported quarterly
results for 1993 were restated to reflect the adoption of Statement of
Financial Accounting Standards ("SFAS") No. 112, "Employers'
Accounting for Postemployment Benefits." In addition, the provisions
for business restructuring have been reclassified to costs and
operating expenses.
(c) PROVISIONS FOR BUSINESS RESTRUCTURING - Provisions for business
restructuring in the three months ended June 30, 1993 totaled $278.
These provisions included $215 for re-engineering customer support
functions for telecommunications services (including $55 for employee
relocation, $25 for outplacement costs, $30 for legal contingencies
and $105 for closing facilities, lease terminations and asset
abandonments associated with centralizing support services). There
were also $63 in provisions to provide for lease terminations, closing
facilities and other related expenses for restructuring activities in
other areas.
These provisions were reclassified as follows: $218 to selling,
general and administrative expenses; $58 to the costs of products and
systems; and $2 to other line items.
(d) OTHER INCOME - In June 1993, AT&T sold its remaining 77% interest in
UNIX System Laboratories, Inc. to Novell, Inc. ("Novell") in exchange
for approximately 3% of Novell common stock. The gain on the sale was
$217.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
(e) CHANGES IN ACCOUNTING PRINCIPLES - Effective January 1, 1993, AT&T
adopted SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." This standard requires companies to
accrue for estimated future postretirement benefit expenses during the
years employees are working and earning benefits for retirement.
Previously, AT&T expensed these benefits as claims were incurred. AT&T
recorded an after-tax charge of $7,023 ($5.20 per share) to record the
unprovided portion of these liabilities as the cumulative effect of an
accounting change in the first quarter of 1993. This accounting change
does not affect cash flows.
Effective January 1, 1993, AT&T adopted SFAS No. 112. This standard
requires companies to accrue for estimated future postemployment
benefits during the years employees are working and accumulating these
benefits. Previously, AT&T recognized the separation costs as they
were identified and disability benefits when paid. AT&T recorded an
after-tax charge of $1,128 ($.84 per share) to record the unprovided
portion of these liabilities as the cumulative effect of an accounting
change in the first quarter of 1993. This accounting change does not
affect cash flows.
Also effective January 1, 1993, AT&T adopted SFAS No. 109, "Accounting
for Income Taxes." Among other provisions, this standard requires tax
assets and liabilities to be determined using the enacted income tax
rates for the years in which taxes will be paid or refunds received.
Prior to 1993, AT&T's deferred tax accounts reflected the statutory
rates that were in effect when the deferrals were initiated. The
adoption of SFAS No. 109 resulted in a net income benefit of $383, or
$.28 per share. This benefit was recorded as the cumulative effect of
an accounting change in the first quarter of 1993. This accounting
change does not affect cash flows.
Effective January 1, 1994, AT&T adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities". The standard
provides for the accounting and reporting for investments in equity
securities that have readily determinable fair values and for all
investments in debt securities. The new standard did not have a
material impact on AT&T's results of operations or financial position.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
(f) INVENTORIES - Inventories at June 30, 1994 and December 31, 1993 were
as follows:
June 30, December 31,
1994 1993
Completed goods............... $2,396 $1,893
Work-in-process and raw
materials.................. 1,576 1,294
Total inventories............. $3,972 $3,187
(g) STATUS OF PROSPECTIVE MERGER WITH McCAW CELLULAR COMMUNICATIONS, INC.
("McCaw")- In August 1993, AT&T and McCaw entered into a definitive
agreement to merge McCaw and a subsidiary of AT&T, making McCaw a
wholly owned subsidiary of AT&T (the "Merger"). The Merger is subject
to a number of conditions, including the receipt of outstanding
approvals (discussed below) and receipt of opinions that the Merger
will be tax free and will qualify for pooling-of-interests accounting
treatment. Various other approvals, including McCaw shareholder
approval, and review by various state regulatory agencies have been
obtained.
On July 15, 1994, AT&T, McCaw and the United States entered into a
proposed antitrust consent decree (the "Proposed Consent Decree")
which would permit the Merger by settling a suit challenging the
Merger filed the same day by the United States. The Proposed Consent
Decree requires approval by the U.S. District Court for the District
of Columbia. Under the Proposed Consent Decree, several conditions
are imposed on the future operations of AT&T and McCaw. These
conditions include: (i) the maintenance of McCaw (and McCaw
affiliates) as a subsidiary or entity separate from AT&T; (ii)
requirements that McCaw cellular systems, within 21 months of the
commencement of the action, cease providing interexchange services and
provide customers of McCaw cellular systems with equal access to any
interexchange carrier that offers service to the system; (iii)
requirements that McCaw cellular systems provide to all interexchange
carriers exchange access on an unbundled basis that is equal in type,
quality, and price to that provided to AT&T; (iv) a prohibition on the
sale by each of AT&T and McCaw of interexchange or local cellular
services at a price, term or discount that depends on whether the
customer obtains both AT&T's interexchange and McCaw's local cellular
services; (v) requirements that AT&T not discriminate in favor of
McCaw in the way in which certain services and products are made
available; (vi) restriction of the flow of certain non-public
information between AT&T and McCaw relating to unaffiliated wireless
system equipment customers of AT&T; (vii) a requirement for AT&T to
continue to provide technological and other support to its
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
unaffiliated cellular system equipment customers; and (viii) a
requirement on AT&T to buy back any cellular system equipment sold to
an unaffiliated cellular carrier if the United States determines AT&T
has violated the information restrictions or support requirements.
The requirements of the Antitrust Procedures and Penalties Act, 15
U.S.C. Section 16, must be complied with before the Proposed Consent
Decree may be entered by the court. The requirements include: (i)
filing with the court and publication of the Proposed Consent Decree
and a competitive impact statement in the Federal Register at least 60
days prior to the effective date of the decree; (ii) an opportunity
for the public to provide written comments and an opportunity for the
United States to reply to such comments; and (iii) a determination by
the court that the Proposed Consent Decree is in the public interest.
The parties to the Proposed Consent Decree have stipulated as follows:
(i) the Proposed Consent Decree may be entered by the court at any
time after compliance with the requirements of the Antitrust
Procedures and Penalties Act; (ii) each party shall abide by and
comply with the provisions of the Proposed Consent Decree pending and
following entry by the court unless the Merger has been earlier
abandoned; and (iii) the United States may withdraw its consent at any
time prior to entry of the Proposed Consent Decree.
The closing of the Merger, however, is not contingent on the prior
entry of the Proposed Consent Decree or the completion of the
requirements of the Antitrust Procedures and Penalties Act. If the
closing of the Merger occurs before the completion of such
requirements, it will nevertheless be subject to any lawful orders
that the court may impose as a result of the proceeding.
On April 5, 1994, the U.S. District Court for the District of
Columbia, acting on a motion filed by BellSouth Corporation on
December 2, 1993, ruled that AT&T's acquisition, under the proposed
Merger, of the interests owned by McCaw in certain cellular properties
controlled by Bell Operating Companies (the "BOCs") would violate the
Modification of Final Judgment of 1982 (the "MFJ"). The court
determined that AT&T must seek a waiver of the MFJ to proceed with the
Merger.
On May 31, 1994, AT&T filed for a waiver of the MFJ to permit the
Merger. Several parties filed responses with the court requesting
that various conditions be imposed on any waiver granted to AT&T, or
opposing the request for a waiver. The Antitrust Division of the U.S.
Department of Justice (the "Antitrust Division") has supported AT&T's
request for the waiver subject to certain conditions on AT&T. Oral
argument on AT&T's motion took place on July 21, 1994, and the matter
is pending. (See Form 8-K filed August 29, 1994 by AT&T regarding the
U.S. District Court for the District of Columbia granting the motion
filed by AT&T for a waiver of Section I(D) of the MFJ.)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
In August 1993, AT&T and Craig O. McCaw filed various applications
seeking consent of the Federal Communications Commission (the "FCC")
to the proposed transfer of control of McCaw to AT&T, which consent is
required prior to consummation of the Merger. Several parties,
including competitors of McCaw and/or AT&T, have filed petitions with
the FCC opposing the request for FCC consent or seeking to impose
conditions on the Merger. The FCC established an initial pleading
cycle which was completed on January 18, 1994.
In May 1994, the FCC established a supplemental pleading cycle which
permitted review of certain of the documents filed by AT&T and McCaw
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
proceeding, and under which further comments and replies were filed.
That pleading cycle was completed on July 1, 1994. The matter is
still pending a decision by the FCC.
On August 8, 1994, Bell Atlantic Corporation, Bell Atlantic Mobile
Systems, Inc. ("Bell Atlantic Mobile"), NYNEX Corporation and NYNEX
Mobile Communications Co. ("NYNEX Mobile") filed an action (the "Bell
Atlantic Complaint") against AT&T and McCaw in the U.S. District Court
for the Eastern District of New York. The action alleges that the
effect of the Merger may be to substantially lessen competition in
interstate trade and commerce in violation of Section 7 of the Clayton
Act. The relief requested includes: a preliminary injunction
preventing and restraining the Merger until the court has ruled on the
merits of the compliant; a judgment that the Merger violates Section 7
of the Clayton Act; and a permanent injunction enjoining the Merger
and any acquisition by AT&T of any direct or indirect interest in
McCaw. AT&T intends to oppose the action, including the preliminary
injunction, and believes it is without merit.
With respect to all of the foregoing, there can be no assurance that
the court or regulatory actions requested by AT&T will be granted or
granted without unacceptable conditions, or that AT&T will
successfully oppose the Bell Atlantic Complaint, or that other
challenges to the Merger will not be made on antitrust grounds. The
United States could challenge the Merger before or after it is
consummated if the Proposed Consent Decree is not approved by the
court or if the United States decides to withdraw its consent prior to
court approval.
If the Merger is not consummated by September 30, 1994, the Merger
agreement may be terminated by AT&T or McCaw. AT&T is not required to
consummate the Merger if any court or governmental or regulatory
authority of competent jurisdiction enjoins the Merger or imposes any
condition or restriction on its consummation unacceptable to AT&T in
its reasonable judgment.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
(h) AT&T CREDIT HOLDINGS, INC. - In connection with a March 31, 1993 legal
restructuring of AT&T Capital Holdings, Inc. (formerly AT&T Capital
Corporation), AT&T issued a direct, full and unconditional guarantee
of all the outstanding public debt of AT&T Credit Holdings, Inc.
(formerly AT&T Credit Corporation) existing at March 31, 1993. AT&T
Credit Holdings, Inc. holds the majority of AT&T's investment in AT&T
Capital Corporation and the lease finance assets of the former AT&T
Credit Corporation. The table below shows summarized consolidated
financial information for AT&T Credit Holdings, Inc., which
consolidates the accounts of AT&T Capital Corporation. Financial
information for prior periods was restated for the legal
restructuring. The summarized financial information includes
transactions with AT&T that are eliminated in consolidation.
For the Six
Months Ended
June 30,
1994 1993
Total revenue $ 687 $ 679
Interest expense 143 143
Operating and administrative
expense 188 158
Income before cumulative effect of
accounting change 34 34
Cumulative effect of accounting
change (1) - (22)
Net Income 34 12
At At
June 30, December 31,
1994 1993
Finance receivables $6,953 $6,220
Net investment in operating
lease assets 795 978
Total assets 8,433 7,886
Total debt 5,054 4,639
Total liabilities 7,376 6,867
Minority interest 255 251
Total shareholder's equity 802 768
(1) Effective January 1, 1993, AT&T Credit Holdings, Inc. adopted SFAS No.
109.
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AT&T AND SUBSIDIARIES AND McCAW AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Combined Statements of Income and
Balance Sheet give effect to the proposed merger (the "Merger") of McCaw
Cellular Communications, Inc. ("McCaw") with a subsidiary of AT&T Corp.
("AT&T") pursuant to an Agreement and Plan of Merger dated August 16, 1993
(the "Merger Agreement") on a pooling-of-interests basis of accounting.
These Unaudited Pro Forma Combined Financial Statements have been prepared
from the historical consolidated financial statements of AT&T and McCaw and
should be read in conjunction therewith.
This pro forma combined information is not necessarily indicative of
actual or future operating results or financial position that would have
occurred or will occur upon consummation of the Merger.
The Unaudited Pro Forma Combined Balance Sheet gives effect to the
Merger as if it had occurred on June 30, 1994, combining the balance sheets
of AT&T and McCaw at June 30, 1994. The Unaudited Pro Forma Combined
Statements of Income give effect to the Merger as if it had occurred at the
beginning of each of the periods presented, combining the results of AT&T
and McCaw for the six month periods ended June 30, 1994 and 1993.
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AT&T AND SUBSIDIARIES AND McCAW AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
Six Months Ended June 30, 1994
(Dollars in Millions, Except Per Share Amounts)
Historical Pro Forma
AT&T McCaw Adjustments Combined
Sales and Revenues
Telecommunications services........... $20,559 $1,065 $21,624
Sales of products and systems......... 9,049 - 9,049
Rentals and other services............ 3,267 248 3,515
Financial services and leasing........ 1,414 - 1,414
Total revenues................... 34,289 1,313 35,602
Costs
Telecommunications services........... 12,473 393 12,866
Products and systems.................. 5,539 - 5,539
Rentals and other services............ 1,591 145 1,736
Financial services and leasing........ 951 - 951
Total costs...................... 20,554 538 21,092
Gross margin.......................... 13,735 775 14,510
Operating Expenses
Selling, general and administrative
expenses............................ 8,592 581 9,173
Research and development expenses..... 1,461 - 1,461
Total operating expenses......... 10,053 581 10,634
Operating income...................... 3,682 194 3,876
Other income, net..................... 184 88 272
Interest expense...................... 263 143 406
Income before income taxes and
preferred stock dividend of a
subsidiary.......................... 3,603 139 3,742
Provision (benefit) for income taxes . 1,379 (24) 1,355
Provision for preferred stock
dividend of a subsidiary............ - 34 34
Net Income ........................... $ 2,224 $ 129 $ 2,353
Weighted average common shares
outstanding......................... 1,361 209 (14)(3B) 1,556
Earnings per common share............. $ 1.63 $ 1.51
Dividends declared per common share... $ 0.66 $ 0.66
See accompanying notes to unaudited pro forma combined financial
statements.<PAGE>
<PAGE> 18
AT&T AND SUBSIDIARIES AND McCAW AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
Six Months Ended June 30, 1993
(Dollars in Millions, Except Per Share Amounts)
Historical Pro Forma
AT&T McCaw Adjustments Combined
Sales and Revenues
Telecommunications services......... $19,800 $ 830 $20,630
Sales of products and systems....... 7,729 - 7,729
Rentals and other services.......... 3,348 190 3,538
Financial services and leasing...... 1,158 - 1,158
Total revenues................. 32,035 1,020 33,055
Costs
Telecommunications services......... 12,370 377 12,747
Products and systems................ 4,632 - 4,632
Rentals and other services.......... 1,573 93 1,666
Financial services and leasing...... 780 - 780
Total costs.................... 19,355 470 19,825
Gross margin........................ 12,680 550 13,230
Operating Expenses
Selling, general and administrative
expenses.......................... 8,258 403 8,661
Research and development expenses... 1,487 - 1,487
Total operating expenses....... 9,745 403 10,148
Operating income.................... 2,935 147 3,082
Other income, net................... 421 111 532
Interest expense.................... 313 205 518
Income before income taxes,
preferred stock dividend of a
subsidiary and cumulative effects
of accounting changes............. 3,043 53 3,096
Provision for income taxes ......... 1,102 22 1,124
Provision for preferred stock
dividend of a subsidiary.......... - 67 67
Income (loss) before cumulative
effects of accounting changes..... 1,941 (36) 1,905
Cumulative effects on prior years of
changes in accounting for:
Postretirement benefits, net... (7,023) - (7,023)
Postemployment benefits, net... (1,128) - (1,128)
Income taxes................... 383 - $(1,840)(3C)(1,457)
Net Loss............................ $(5,827) $ (36)$(1,840) $(7,703)
Weighted average common shares
outstanding.......... ............ 1,350 199 (10)(3B) 1,539
Per common share:
Income before cumulative effects of
accounting changes................ $ 1.44 $ 1.24
Cumulative effects of accounting
changes........................... (5.76) (6.24)
Net loss............................ $ (4.32) $ (5.00)
Dividends declared per common share. $ 0.66 $ 0.66
See accompanying notes to unaudited pro forma combined financial statements<PAGE>
<PAGE> 19
AT&T AND SUBSIDIARIES AND McCAW AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
June 30, 1994
(Dollars in millions)
Historical Pro Forma
AT&T McCaw Adjustments Combined
ASSETS
Cash and temporary cash
investments ................. $ 967 $ 165 $ 1,132
Receivables, net of allowances
Accounts receivable ......... 12,118 376 12,494
Finance receivables ......... 12,492 - 12,492
Inventories ................... 3,972 48 4,020
Deferred income taxes ......... 2,230 - 2,230
Other current assets .......... 975 84 1,059
Total current assets ..... 32,754 673 33,427
Property, plant and
equipment, net .............. 19,133 1,871 21,004
Licensing costs, net .......... - 4,096 4,096
Investments ................... 1,237 1,528 $(400)(3B) 2,365
Finance receivables ........... 4,099 - 4,099
Prepaid pension costs ......... 3,893 - 3,893
Other assets, net ............. 3,159 937 (39)(3C) 4,057
TOTAL ASSETS .................. $64,275 $9,105 $(439) $72,941
LIABILITIES and
DEFERRED CREDITS
Accounts payable .............. $ 5,353 $ 93 $ 5,446
Payroll and benefit-related
liabilities ................. 3,431 60 3,491
Postretirement and postemploy-
ment benefit liabilities .... 1,188 - 1,188
Debt maturing within one year . 9,213 188 9,401
Dividends payable ............. 449 - 449
Other current liabilities ..... 4,737 368 5,105
Total current liabilities. 24,371 709 25,080
Long-term debt, including
capital leases .............. 9,114 5,339 14,453
Postretirement and postemploy-
ment benefit liabilities..... 8,981 - 8,981
Other liabilities ............. 4,371 75 4,446
Deferred income taxes ......... 484 1,966 2,450
Unamortized investment tax ....
credits ..................... 245 - 245
Other deferred credits......... 432 - 432
Total liabilities and
deferred credits ....... 47,998 8,089 56,087
Minority interests............. 618 445 1,063
(continued)<PAGE>
<PAGE> 20
AT&T AND SUBSIDIARIES AND McCAW AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(continued)
June 30, 1994
(Dollars in millions)
Historical Pro Forma
AT&T McCaw Adjustments Combined
SHAREOWNERS' EQUITY
Common stock ............... $ 1,360 $ 2 $ 193 (3A) $ 1,555
Additional paid-in capital . 12,413 3,348 (193)(3A) 15,168
(400)(3B)
Guaranteed ESOP
obligation ............... (331) - (331)
Foreign currency translation
adjustments .............. 50 - 50
Retained earnings (deficit). 2,167 (2,779) (39)(3C) (651)
Total shareowners'
equity .............. 15,659 571 (439) 15,791
TOTAL LIABILITIES
& SHAREOWNERS' EQUITY .... $64,275 $9,105 $(439) $72,941
See accompanying notes to unaudited pro forma combined financial
statements.
<PAGE>
<PAGE> 21
AT&T AND SUBSIDIARIES AND McCAW AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
Note 1 - Historical Presentation
Previously reported quarterly results for AT&T for 1993 were restated
to reflect the adoption of Statement of Financial Accounting Standards
("SFAS") No. 112, "Employers' Accounting for Postemployment Benefits." In
addition, the provisions for business restructuring have been reclassified
to costs and operating expenses.
Certain amounts reported in McCaw's historical financial statements
have been reclassified to conform to the AT&T presentations in the
accompanying Unaudited Pro Forma Combined Balance Sheet and Statements of
Income. Such reclassifications are not material to the Unaudited Pro Forma
Combined Financial Statements.
Note 2 - Exchange Ratio
As defined in the Merger Agreement, the Exchange Ratio will be one
AT&T Common Share for each share of McCaw Common Stock; provided, however,
that (i) in the event the Closing Date Market Price of one AT&T Common
Share (as such terms are defined in the Merger Agreement) is less than
$53.00, the Exchange Ratio will be equal to $53.00 divided by the Closing
Date Market Price of one AT&T Common Share, but in no event greater than
1.111 AT&T Common Shares, and (ii) in the event the Closing Date Market
Price of one AT&T Common Share is greater than $71.73, the Exchange Ratio
will be equal to $71.73 divided by the Closing Date Market Price of one
AT&T Common Share, but in no event less than .909 of an AT&T Common Share.
For purposes of the Unaudited Pro Forma Combined Financial Statements, an
Exchange Ratio of one AT&T Common Share per share of McCaw Common Stock (as
defined in the Merger Agreement) is assumed.
Note 3 - Other Pro Forma Adjustments
(A) The McCaw Common Stock account has been adjusted to reflect the
assumed exchange of one AT&T Common Share, par value $1.00 per share, for
each of approximately 195.3 million shares of McCaw Common Stock, par value
$.01 per share, outstanding at June 30, 1994 (excluding shares of McCaw
Common Stock held by AT&T - see Note 3(B)). The difference between the par
value of the AT&T Common Shares and the par value of the McCaw Common
Stock, after giving effect to the assumed Exchange Ratio, is reflected as a
reduction to additional paid-in capital of $193.
(B) The $400 investment by AT&T in 14.5 million shares of Class A
Common Stock purchased in February 1993 has been eliminated. The weighted
average common shares outstanding for the six months ended June 30, 1993
and June 30, 1994 have been adjusted to give affect to the elimination of
this investment.
<PAGE>
<PAGE> 22
(C) McCaw's historical financial statements reflect the adoption of
SFAS No. 109, "Accounting for Income Taxes," retroactive to January 1,
1991. AT&T adopted SFAS No. 109 effective January 1, 1993. For conformity
purposes, the pro forma combined financial statement information for AT&T
and McCaw has been adjusted as if McCaw had adopted SFAS No. 109 on January
1, 1993. Such adoption would result in the use of different tax
assumptions related to intangible assets McCaw acquired in purchase
business combinations in 1991 and 1992 that would increase the cumulative
effect of adopting SFAS No. 109 by $39. Accordingly, the pro forma
combined net income and earnings per common share have been decreased by
$1,840 and $1.20, respectively, for the period ended June 30, 1993. Pro
forma combined total assets and shareowners' equity have been decreased $39
at June 30, 1994. Also, effective January 1, 1993, AT&T adopted SFAS No.
112, "Employers' Accounting for Postemployment Benefits." McCaw adopted
SFAS No. 112 effective January 1, 1994. The impact of this standard on
McCaw's financial statements is immaterial, therefore no adjustment has
been made to the Unaudited Pro Forma Combined Financial Statements.
(D) No adjustments have been reflected in the Unaudited Pro Forma
Combined Financial Statements for direct expenses related to the Merger.
Direct expenses included in the historical periods presented have not been
adjusted for in the Unaudited Pro Forma Combined Financial Statements as
such amounts are not material.
(E) No adjustments to eliminate intercompany transactions and balances
have been made in the Unaudited Pro Forma Combined Financial Statements as
such amounts are not material.
(F) The cash dividends per common share in the Unaudited Pro Forma
Combined Financial Statements reflect AT&T's cash dividends declared in the
periods presented. McCaw has never paid cash dividends on the McCaw Common
Stock.
Note 4 - Federal Income Tax Consequences of the Merger
The Unaudited Pro Forma Combined Financial Statements assume that the
Merger qualifies as a "tax-free" reorganization for federal income tax
purposes.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this amendment to be signed on its
behalf by the undersigned thereunto duly authorized.
McCAW CELLULAR COMMUNICATIONS, INC.
ANDREW A. QUARTNER
-----------------------------------
Andrew A. Quartner
Senior Vice President-Law
Date: September 2, 1994
<PAGE>
<PAGE>
EXHIBIT INDEX
Exhibit
Number
2(a) Agreement and Plan of Merger, dated August 16, 1993,
among AT&T, Ridge Merger Corporation and the Company
(incorporated by reference to Exhibit 2(a) to the
Company's quarterly report on Form 10-Q for the quarter
ended June 30, 1993, as amended).
99(a) Agreement, dated as of August 16, 1993, among AT&T,
Craig O. McCaw, John E. McCaw, Jr., Bruce R. McCaw and
Keith W. McCaw, et al (incorporated by reference to
Exhibit 99(a) to the Company's quarterly report on Form
10-Q for the quarter ended June 30, 1993, as amended).
99(b) Press Release, dated August 16, 1993 (incorporated by
reference to Exhibit 99(b) to the Company's quarterly
report on Form 10-Q for the quarter ended June 30,
1993, as amended).
99(c) Letter, dated August 16, 1993, from American Telephone
and Telegraph Company to McCaw Cellular Communications,
Inc. (incorporated by reference to Exhibit 99(c) to the
Company's quarterly report on Form 10-Q for the quarter
ended June 30, 1993, as amended).
