<PAGE>
<PAGE>1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 11, 1995
Frontier Corporation
----------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 1-4166 16-0613330
-------------- ---------- ------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
180 South Clinton Avenue
Rochester, New York 14646
-------------------------------------------------
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code
(716) 777-1000
Item 5 Other Events
- ------ ------------
The Registrant has announced and entered into proposed acquisitions
which in the aggregate exceed the significant subsidiary test under
Rule 1-02(v) of Regulation S-X.
Filed by this Report on Form 8-K are Unaudited Pro Forma Combined
Financial Information and the Notes to Unaudited Pro Forma Combined
Financial Statements for Frontier Corporation, WCT Communications,
Inc., Enhanced TeleManagement, Inc., Schneider Communications, Inc.
(and its 80.8% majority-owned subsidiary, LinkUSA Corporation) and
ALC Communications Corporation.
<PAGE>
<PAGE>2
-2-
The Form 8-K, filed April 12, 1995 of the Registrant and the Form
10-K of ALC Communications Corporation for the year ended
December 31, 1994, filed March 24, 1995, are hereby incorporated in
this Form 8-K by reference thereto.
Item 7 Financial Statements and Exhibits
- ------ ---------------------------------
(a) Unaudited Pro Forma Combined Financial Information
Frontier Corporation, WCT Communications, Inc., Enhanced
TeleManagement, Inc., Schneider Communications, Inc. and ALC
Communications Corporation
- Unaudited Pro Forma Combined Balance Sheet: As of
March 31, 1995
Frontier Corporation, WCT Communications, Inc., Enhanced
TeleManagement, Inc. and Schneider Communications, Inc.
- Unaudited Pro Forma Combined Statement of Income: For the
Three Months Ended March 31, 1995 and 1994
Frontier Corporation, WCT Communications, Inc., Enhanced
TeleManagement, Inc. and Schneider Commuinications, Inc.
- Unaudited Pro Forma Combined Statement of Income: For
the Year Ended December 31, 1994
Frontier Corporation Pro Forma and ALC Communications
Corporation
- Unaudited Pro Forma Combined Statement of Income: For the
Three Months Ended March 31, 1995 and 1994
Frontier Corporation Pro Forma and ALC Communications
Corporation
- Unaudited Pro Forma Combined Statement of Income: For the
Year Ended December 31, 1994
Frontier Corporation and ALC Communications Corporation
- Unaudited Pro Forma Combined Statement of Income: For the
Years Ended December 31, 1993 and 1992
Frontier Corporation - Notes to Unaudited Pro Forma Combined
Financial Statements
<PAGE>
<PAGE>3
-3-
(b) Exhibits
--------
23-1 Consent of Independent Accountants
(Price Waterhouse LLP)
23-2 Consent of Independent Accountants
(Ernst & Young LLP)
<PAGE>
<PAGE>4
-4-
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 of the undersigned hereunto duly authorized.
Frontier Corporation
(Registrant)
/s/ Louis L. Massaro
Dated: June 6, 1995 By: ----------------------------
Louis L. Massaro
Corporate Vice President-
Finance
<PAGE>
<PAGE>5
-5-
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
23-1 Consent of Independent Accountants Filed Herewith
(Price Waterhouse LLP)
23-2 Consent of Independent Accountants Filed Herewith
(Ernst & Young LLP)
<PAGE>
<PAGE>6
Unaudited Pro Forma Combined Financial Statements
The following unaudited pro forma combined financial statements give
effect to the following completed and proposed transactions by
Frontier Corporation ("Frontier"):
- - The acquisition of WCT Communications, Inc. ("WCT") at a
purchase price of approximately $85.3 million, including
acquisition costs and $2.5 million for various non-compete
agreements. The transaction is accounted for using the
purchase method of accounting. The transaction closed on
May 18, 1995.
- - The acquisition of Enhanced TeleManagement, Inc. ("ETI") at a
purchase price of approximately $29 million, including acquisition
costs. The transaction will be accounted for using the purchase
method of accounting. The transaction is pending.
- - The acquisition of Schneider Communications, Inc. and its
approximately 81% majority owned subsidiary, LinkUSA Corporation
(collectively, "SCI"), at a purchase price of approximately $132.2
million, including acquisition costs and $3.3 million for various
non-compete agreements. The transaction will be accounted for
using the purchase method of accounting. The transaction is
pending.
- - The merger with ALC Communications Corporation ("ALC") for an
estimated 78.7 million Frontier common shares in which Frontier
will exchange two shares of its common stock for each share of ALC
common stock. The transaction will be accounted for using the
pooling of interests method of accounting. The transaction is
pending.
With respect to Frontier, the unaudited pro forma combined financial
statements are based on the restated financial statements incorporated
by reference herein of Frontier's Current Report on Form 8-K dated
April 12, 1995, which reflect the acquisition on March 17, 1995, of
American Sharecom, Inc. ("ASI") under the pooling of interests method
of accounting, and Frontier's Quarterly Report on Form 10-Q for the
three months ended March 31, 1995.
Frontier has completed a business acquisition and disposition and has
pending other business acquisitions expected to be consummated in
1995 which individually and in the aggregate are not significant. As
such, pro forma data on these transactions are not presented.
The unaudited pro forma combined balance sheet presents the financial
position of Frontier as of March 31, 1995, assuming that the completed
and proposed acquisitions of WCT, ETI and SCI and the proposed merger
with ALC occurred as of March 31, 1995. Such pro forma information
is based on the historical balance sheets of Frontier, WCT, ETI, SCI
and ALC as of that date.
<PAGE>
<PAGE>7
The unaudited pro forma combined statements of income reflect the
acquisitions by Frontier of WCT, ETI and SCI and the merger of
Frontier and ALC. As required by Rule 11-02 of Regulation S-X,
the unaudited pro forma combined statements of income first assume
the combination of WCT, ETI and SCI, which are to be accounted for
under the purchase method of accounting, as of the beginning of the
most recent fiscal year ended December 31, 1994, and the three months
ended March 31, 1995 and 1994. With respect to WCT and ETI, the
unaudited pro forma combined statements of income reflect their
respective results of operations for the most recent twelve month
period ended December 31, 1994, and for the three months ended March
31, 1995 and 1994. With respect to SCI, the unaudited pro forma
combined statements of income reflect its historical results of
operations for the year ended December 31, 1994, and for the three
months ended March 31, 1995 and 1994. These pro forma results then
assume the merger with ALC, which is to be accounted for using the
pooling of interests method of accounting, as of the beginning of the
three most recent fiscal years ended December 31, 1994, 1993 and
1992, and the three months ended March 31, 1995 and 1994, to arrive
at the unaudited pro forma combined statements of income for
Frontier. The unaudited pro forma combined statements of income
reflect results of operations of ALC for the most recent fiscal years
ended December 31, 1994, 1993 and 1992, and for the three months
ended March 31, 1995 and 1994.
The unaudited pro forma combined financial statements give effect
only to the pro forma adjustments, which reflect certain assumptions
on the bases described in the notes to these unaudited pro forma
combined financial statements. Nonrecurring charges, including
legal, investment banker fees of approximately $13 million and other
professional fees directly attributable to the merger with ALC, are
not included in the unaudited pro forma combined financial
statements. As the nonrecurring charges are incurred, they will be
included in the expenses of the combined operations.
The unaudited pro forma combined financial statements do not reflect
any synergies anticipated by Frontier's management as a result of any
or all of these combinations.
The unaudited pro forma data is presented for informational purposes
only and is not necessarily indicative of the results of operations
or financial position which would have been achieved had the
transactions been completed as of the beginning of the earliest
period presented, nor is it necessarily indicative of Frontier's
future results of operations or financial position.
The unaudited pro forma combined financial statements should be read
in conjunction with the historical financial statements of Frontier
(as restated to reflect the acquisition of ASI on March 17, 1995,
under the pooling of interests method of accounting and reported on
Frontier's Current Report on Form 8-K dated April 12, 1995) and of ALC,
which are incorporated by reference into this filing. The historical
financial statements of WCT, ETI and SCI are not required to be
presented in this document under Rule 3-05 of Regulation S-X as
WCT, ETI and SCI do not qualify as a significant subsidiary as
defined in Rule 1-02(v) of Regulation S-X.
<PAGE>
<PAGE>8
<TABLE>
<CAPTION>
FRONTIER CORPORATION, WCT COMMUNICATIONS, INC., ENHANCED TELEMANAGEMENT, INC.,
SCHNEIDER COMMUNICATIONS, INC. AND ALC COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 1995
(In thousands of dollars)
Frontier WCT ETI SCI ALC Pro Forma Pro Forma
Historical Historical Historical Historical Historical Adjustments Combined
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $316,363 $812 $3,258 $470 $3,016 ($243,813)(b)(c)(d) $80,106
Short-term investments 297 297
Accounts receivable 182,108 31,472 3,826 10,018 103,791 (7,372)(b)(d) 323,843
Material and supplies 9,276 28 392 2,741 12,437
Prepayments and other 29,490 5,782 187 3,200 10,371 (110)(b) 48,920
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Current Assets 537,534 38,066 7,299 14,080 119,919 (251,295) 465,603
---------- ---------- ---------- ---------- ---------- ---------- ----------
Property, Plant and Equipment:
Total Property, Plant and Equipment 1,773,831 42,011 1,174 11,596 154,180 2,828 (b) 1,985,620
Less - Accumulated depreciation 812,068 81,003 893,071
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Property, Plant and Equipment 961,763 42,011 1,174 11,596 73,177 2,828 1,092,549
---------- ---------- ---------- ---------- ---------- ---------- ----------
Goodwill 157,586 1,574 2,194 89,092 216,698 (b)(c)(d) 467,144
Deferred and Other Assets 136,008 10,449 180 3,819 48,255 20,777 (b)(c)(d) 219,488
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Assets $1,792,891 $92,100 $8,653 $31,689 $330,443 ($10,992) $2,244,784
========== ========== ========== ========== ========== ========== ==========
LIABILITIES AND SHAREOWNERS' EQUITY:
Current Liabilities:
Accounts payable $146,087 $40,702 $3,366 $11,948 $104,003 $15,926 (b)(c)(d) $322,032
Notes payable 58 13,878 37 13,973
Advance billings 11,614 735 185 12,534
Dividends payable 17,041 17,041
Long-term debt due within one year 4,404 6,078 237 10,719
Taxes accrued 33,426 57 3,588 13,986 (3,588)(d) 47,469
Interest accrued 11,613 11,613
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Current Liabilities 224,243 60,658 4,195 15,721 118,226 12,338 435,381
---------- ---------- ---------- ---------- ---------- ---------- ----------
Long-Term Debt 567,090 19,652 104 4,596 88,514 2,911 (b) 682,867
Deferred Income Taxes 108,497 19 (978) (10,429) 1,970 (c)(d) 99,079
Deferred Employee Benefit Obligations 49,320 249 15 (b) 49,584
Minority Interests 351 351
<PAGE>
<PAGE>9
Shareowners' Equity:
Common Stock 81,871 23,744 2,142 1 337 52,513 (a)(b)(c)(d) 160,608
Capital in excess of par value 258,438 1,000 152,102 (79,400)(a)(b)(c)(d) 332,140
Retained earnings (Accumulated deficit) 480,451 (12,203) 2,193 11,349 (18,307) (1,339)(a)(b)(c)(d) 462,144
---------- ---------- ---------- ---------- ---------- ---------- ----------
820,760 11,541 4,335 12,350 134,132 (28,226) 954,892
Less - Treasury stock at cost 147 147
---------- ---------- ---------- ---------- ---------- ---------- ----------
Common Shareowners' Equity 820,613 11,541 4,335 12,350 134,132 (28,226) 954,745
Preferred Stock 22,777 22,777
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Shareowners' Equity 843,390 11,541 4,335 12,350 134,132 (28,226) 977,522
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Liabilities and Shareowners' Equity $1,792,891 $92,100 $8,653 $31,689 $330,443 ($10,992) $2,244,784
========== ========== ========== ========== ========== ========== ==========
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
</TABLE>
<PAGE>
<PAGE>10
<TABLE>
<CAPTION>
FRONTIER CORPORATION, WCT COMMUNICATIONS, INC., ENHANCED TELEMANAGEMENT, INC.
AND SCHNEIDER COMMUNICATIONS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1995
(In thousands of dollars, Frontier/WCT/
except per share data) ETI/SCI
Frontier WCT ETI SCI Pro Forma Pro Forma
Historical Historical Historical Historical Adjustments Combined
<S> <C> <C> <C> <C> <C> <C>
Revenues and Sales $283,418 $40,443 $8,020 $21,646 $353,527
---------- ---------- ---------- ---------- ---------- ----------
Costs And Expenses:
Operating expenses 179,309 38,396 7,539 17,224 $3,287 (b)(c)(d) 245,755
Cost of goods sold 4,133 85 4,218
Depreciation 29,911 1,495 74 1,095 32,575
Taxes other than income taxes 10,628 144 15 620 11,407
Acquisition related charges 4,750 4,750
---------- ---------- ---------- ---------- ---------- ----------
Total Costs and Expenses 228,731 40,035 7,713 18,939 3,287 298,705
---------- ---------- ---------- ---------- ---------- ----------
Operating Income 54,687 408 307 2,707 (3,287) 54,822
Interest expense 11,704 1,665 4 304 5,333 (b)(c)(d) 19,010
Other income and expense:
Allowance for funds used during construction 326 326
Gain (loss) on sale of assets/subsidiaries 4,826 (13) 4,813
Equity earnings from unconsolidated
interests in wireless interests 396 396
Other income (expense), net 1,948 73 67 (6) 2,082
---------- ---------- ---------- ---------- ---------- ----------
Income (Loss) Before Taxes 50,479 (1,184) 370 2,384 (8,620) 43,429
Income taxes (benefit) 18,804 143 1,038 (2,516)(b)(c)(d) 17,469
---------- ---------- ---------- ---------- ---------- ----------
Consolidated Income (Loss) From Continuing Ops 31,675 (1,184) 227 1,346 (6,104) 25,960
Dividends on preferred stock 297 297
---------- ---------- ---------- ---------- ---------- ----------
Income (Loss) Applicable to Common Stock $31,378 ($1,184) $227 $1,346 ($6,104) $25,663
========== ========== ========== ========== ========== ==========
EARNINGS PER COMMON SHARE Frontier/WCT/
ETI/SCI
Frontier Pro Forma
Historical Combined
Primary:
Income applicable to common stock $31,378 $25,663
Average common shares outstanding 81,932 81,932
---------- ----------
Earnings Per Common Share - Primary $.38 $.31
========== ==========
Fully Diluted:
Adjusted income applicable to common stock $31,468 $25,753
Adjusted average common shares outstanding 82,465 82,465
---------- ----------
Earnings Per Common Share - Fully Diluted $.38 $.31
========== ==========
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
</TABLE>
<PAGE>
<PAGE>11
<TABLE>
<CAPTION>
FRONTIER CORPORATION, WCT COMMUNICATIONS, INC., ENHANCED TELEMANAGEMENT, INC.
AND SCHNEIDER COMMUNICATIONS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1994
(In thousands of dollars, Frontier/WCT/
except per share data) ETI/SCI
Frontier WCT ETI SCI Pro Forma Pro Forma
Historical Historical Historical Historical Adjustments Combined
<S> <C> <C> <C> <C> <C> <C>
Revenues and Sales $272,103 $27,035 $6,685 $18,897 $324,720
---------- ---------- ---------- ---------- ---------- ----------
Costs And Expenses:
Operating expenses 171,877 25,676 6,736 16,208 $3,287 (b)(c)(d) 223,784
Cost of goods sold 6,381 25 6,406
Depreciation 29,539 547 56 866 31,008
Taxes other than income taxes 12,086 89 12 582 12,769
---------- ---------- ---------- ---------- ---------- ----------
Total Costs and Expenses 219,883 26,312 6,829 17,656 3,287 273,967
---------- ---------- ---------- ---------- ---------- ----------
Operating Income 52,220 723 (144) 1,241 (3,287) 50,753
Interest expense 10,980 736 303 4,266 (b)(c)(d) 16,285
Other income and expense:
Allowance for funds used during construction 276 276
Gain on sale of assets/subsidiaries 1,038 1,038
Equity earnings from unconsolidated
interests in wireless interests 197 197
Other income (expense), net (837) 24 48 142 (623)
---------- ---------- ---------- ---------- ---------- ----------
Income (Loss) Before Taxes 40,876 11 (96) 2,118 (7,553) 35,356
Income taxes (benefit) 15,363 4 (30) 954 (2,142)(b)(c)(d) 14,149
---------- ---------- ---------- ---------- ---------- ----------
Consolidated Income (Loss) From
Continuing Operations 25,513 7 (66) 1,164 (5,411) 21,207
Dividends on preferred stock 297 297
---------- ---------- ---------- ---------- ---------- ----------
Income (Loss) Applicable to Common Stock $25,216 $7 ($66) $1,164 ($5,411) $20,910
========== ========== ========== ========== ========== ==========
EARNINGS PER COMMON SHARE Frontier/WCT/
ETI/SCI
Frontier Pro Forma
Historical Combined
Primary:
Income applicable to common stock $25,216 $20,910
Average common shares outstanding 79,303 79,303
---------- ----------
Earnings Per Common Share - Primary $.32 $.26
========== ==========
Fully Diluted:
Adjusted income applicable to common stock $25,306 $21,000
Adjusted average common shares outstanding 79,809 79,809
---------- ----------
Earnings Per Common Share - Fully Diluted $.32 $.26
========== ==========
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
</TABLE>
<PAGE>
<PAGE>12
<TABLE>
<CAPTION>
FRONTIER CORPORATION, WCT COMMUNICATIONS, INC., ENHANCED TELEMANAGEMENT, INC.
AND SCHNEIDER COMMUNICATIONS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
(In thousands of dollars, Frontier WCT ETI SCI Frontier/WCT/
except per share data) Year Ended 12 Mos Ended 12 Mos Ended Year Ended ETI/SCI
12/31/94 12/31/94 12/31/94 12/31/94 Pro Forma Pro Forma
Historical Historical Historical Historical Adjustments Combined
<S> <C> <C> <C> <C> <C> <C>
Revenues and Sales $1,108,109 $131,197 $28,751 $76,615 $1,344,672
---------- ---------- ---------- ---------- ---------- ----------
Costs And Expenses:
Operating expenses 677,856 132,267 28,204 62,021 $13,148 (b)(c)(d) 913,496
Cost of goods sold 18,850 194 19,044
Depreciation 119,252 3,966 252 3,802 127,272
Taxes other than income taxes 47,050 367 74 2,430 49,921
---------- ---------- ---------- ---------- ---------- ----------
Total Costs and Expenses 863,008 136,600 28,724 68,253 13,148 1,109,733
---------- ---------- ---------- ---------- ---------- ----------
Operating Income 245,101 (5,403) 27 8,362 (13,148) 234,939
Interest expense 43,741 4,134 12 1,038 17,066 (b)(c)(d) 65,991
Other income and expense:
Allowance for funds used during construction 1,096 1,096
Gain on sale of assets/subsidiaries 10,063 1,076 11,139
Equity earnings from unconsolidated
interests in wireless interests 3,185 3,185
Other income (expense), net (20,277) 194 223 237 (19,623)
---------- ---------- ---------- ---------- ---------- ----------
Income (Loss) Before Taxes 195,427 (9,343) 238 8,637 (30,214) 164,745
Income taxes (benefit) 72,503 (1,694) 121 3,961 (8,572)(b)(c)(d) 66,319
---------- ---------- ---------- ---------- ---------- ----------
Consolidated Income (Loss) From
Continuing Operations 122,924 (7,649) 117 4,676 (21,642) 98,426
Dividends on preferred stock 1,186 1,186
---------- ---------- ---------- ---------- ---------- ----------
Income (Loss) Applicable to Common Stock $121,738 ($7,649) $117 $4,676 ($21,642) $97,240
========== ========== ========== ========== ========== ==========
EARNINGS PER COMMON SHARE Frontier/WCT/
ETI/SCI
Frontier Pro Forma
Historical Combined
Primary:
Income applicable to common stock $121,738 $97,240
Average common shares outstanding 81,285 81,285
---------- ----------
Earnings Per Common Share - Primary $1.50 $1.20
========== ==========
Fully Diluted:
Adjusted income applicable to common stock $122,098 $97,600
Adjusted average common shares outstanding 81,783 81,783
---------- ----------
Earnings Per Common Share - Fully Diluted $1.49 $1.19
========== ==========
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
</TABLE>
<PAGE>
<PAGE>13
<TABLE>
<CAPTION>
FRONTIER CORPORATION PRO FORMA AND ALC COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1995
(In thousands of dollars, Frontier/WCT/
except per share data) ETI/SCI
Pro Forma ALC Pro Forma Pro Forma
Combined Historical Adjustments Combined
<S> <C> <C> <C> <C>
Revenues and Sales $353,527 $177,753 $531,280
---------- ---------- ---------- ----------
Costs And Expenses:
Operating expenses 245,755 140,005 385,760
Cost of goods sold 4,218 4,218
Depreciation 32,575 3,486 36,061
Taxes other than income taxes 11,407 963 12,370
Acquisition related charges 4,750 4,750
---------- ---------- ---------- ----------
Total Costs and Expenses 298,705 144,454 443,159
---------- ---------- ---------- ----------
Operating Income 54,822 33,299 88,121
Interest expense 19,010 2,162 21,172
Other income and expense:
Allowance for funds used during construction 326 326
Gain (loss) on sale of assets/subsidiaries 4,813 (1) 4,812
Equity earnings from unconsolidated
interests in wireless interests 396 396
Other income, net 2,082 714 2,796
---------- ---------- ---------- ----------
Income Before Taxes 43,429 31,850 75,279
Income taxes 17,469 11,875 29,344
---------- ---------- ---------- ----------
Consolidated Income From Continuing
Operations 25,960 19,975 45,935
Dividends on preferred stock 297 297
---------- ---------- ---------- ----------
Income Applicable to Common Stock $25,663 $19,975 $45,638
========== ========== ========== ==========
EARNINGS PER COMMON SHARE Frontier/WCT/
ETI/SCI
Pro Forma Pro Forma
Combined Combined
Primary:
Income applicable to common stock $25,663 $45,638
Average common shares outstanding 81,932 160,669
---------- ----------
Earnings Per Common Share - Primary $.31 $.28
========== ==========
Fully Diluted:
Adjusted income applicable to common stock $25,753 $45,728
Adjusted average common shares outstanding 82,465 161,202
---------- ----------
Earnings Per Common Share - Fully Diluted $.31 $.28
========== ==========
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
</TABLE>
<PAGE>
<PAGE>14
<TABLE>
<CAPTION>
FRONTIER CORPORATION PRO FORMA AND ALC COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1994
(In thousands of dollars, Frontier/WCT/
except per share data) ETI/SCI
Pro Forma ALC Pro Forma Pro Forma
Combined Historical Adjustments Combined
<S> <C> <C> <C> <C>
Revenues and Sales $324,720 $129,789 $454,509
---------- ---------- ---------- ----------
Costs And Expenses:
Operating expenses 223,784 103,288 327,072
Cost of goods sold 6,406 6,406
Depreciation 31,008 2,668 33,676
Taxes other than income taxes 12,769 (780) 11,989
---------- ---------- ---------- ----------
Total Costs and Expenses 273,967 105,176 379,143
---------- ---------- ---------- ----------
Operating Income 50,753 24,613 75,366
Interest expense 16,285 2,045 18,330
Other income and expense:
Allowance for funds used during construction 276 276
Gain on sale of assets/subsidiaries 1,038 98 1,136
Equity earnings from unconsolidated
interests in wireless interests 197 197
Other income (expense), net (623) 229 (394)
---------- ---------- ---------- ----------
Income Before Taxes 35,356 22,895 58,251
Income taxes 14,149 8,250 22,399
---------- ---------- ---------- ----------
Consolidated Income From Continuing
Operations 21,207 14,645 35,852
Dividends on preferred stock 297 297
---------- ---------- ---------- ----------
Income Applicable to Common Stock $20,910 $14,645 $35,555
========== ========== ========== ==========
EARNINGS PER COMMON SHARE Frontier/WCT/
ETI/SCI
Pro Forma Pro Forma
Combined Combined
Primary:
Income applicable to common stock $20,910 $35,555
Average common shares outstanding 79,303 158,040
---------- ----------
Earnings Per Common Share - Primary $.26 $.22
========== ==========
Fully Diluted:
Adjusted income applicable to common stock $21,000 $35,645
Adjusted average common shares outstanding 79,809 158,546
---------- ----------
Earnings Per Common Share - Fully Diluted $.26 $.22
========== ==========
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
</TABLE>
<PAGE>
<PAGE>15
<TABLE>
<CAPTION>
FRONTIER CORPORATION PRO FORMA AND ALC COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
(In thousands of dollars Frontier/WCT/
except per share data) ETI/SCI
Pro Forma ALC Pro Forma Pro Forma
Combined Historical Adjustments Combined
<S> <C> <C> <C>
Revenues and Sales $1,344,672 $567,824 $1,912,496
---------- ---------- ---------- ----------
Costs And Expenses:
Operating expenses 913,496 448,272 1,361,768
Cost of goods sold 19,044 19,044
Depreciation 127,272 11,426 138,698
Taxes other than income taxes 49,921 1,453 51,374
---------- ---------- ---------- ----------
Total Costs and Expenses 1,109,733 461,151 1,570,884
---------- ---------- ---------- ----------
Operating Income 234,939 106,673 341,612
Interest expense 65,991 7,570 73,561
Other income and expense:
Allowance for funds used during construction 1,096 1,096
Gain on sale of assets/subsidiaries 11,139 13 11,152
Equity earnings from unconsolidated
interests in wireless interests 3,185 3,185
Other income (expense), net (19,623) 1,788 (17,835)
---------- ---------- ---------- ----------
Income Before Taxes 164,745 100,904 265,649
Income taxes 66,319 36,575 102,894
---------- ---------- ---------- ----------
Consolidated Income From Continuing
Operations 98,426 64,329 162,755
Dividends on preferred stock 1,186 1,186
---------- ---------- ---------- ----------
Income Applicable to Common Stock $97,240 $64,329 $161,569
========== ========== ========== ==========
EARNINGS PER COMMON SHARE
Frontier/WCT/
ETI/SCI
Pro Forma Pro Forma
Combined Combined
Primary:
Income applicable to common stock $97,240 $161,569
Average common shares outstanding 81,285 160,022
---------- ----------
Earnings Per Common Share - Primary $1.20 $1.01
========== ==========
Fully Diluted:
Adjusted income applicable to common stock $97,600 $161,929
Adjusted average common shares outstanding 81,783 160,520
---------- ----------
Earnings Per Common Share - Fully Diluted $1.19 $1.01
========== ==========
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
</TABLE>
<PAGE>
<PAGE>16
<TABLE>
<CAPTION>
FRONTIER CORPORATION AND ALC COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
(In thousand of dollars, Frontier ALC Pro Forma Pro Forma
except per share data) Historical Historical Adjustments Combined
<S> <C> <C> <C> <C>
Revenues and Sales $1,007,394 $436,432 $1,443,826
---------- ---------- ---------- ----------
Costs And Expenses:
Operating expenses 613,988 354,563 968,551
Cost of goods sold 20,819 20,819
Depreciation 116,491 9,776 126,267
Taxes other than income taxes 47,476 2,862 50,338
Software write-off 3,300 3,300
---------- ---------- ---------- ----------
Total Costs and Expenses 802,074 367,201 1,169,275
---------- ---------- ---------- ----------
Operating Income 205,320 69,231 274,551
Interest expense 46,648 11,026 57,674
Other income and expense:
Allowance for funds used during construction 1,330 1,330
Gain (loss) on sale of assets/subsidiaries 4,449 (27) 4,422
Equity earnings from unconsolidated
interests in wireless interests 1,296 1,296
Other income (expense), net (21,656) 248 (21,408)
---------- ---------- ---------- ----------
Income Before Taxes 144,091 58,426 202,517
Income taxes 54,758 18,750 73,508
---------- ---------- ---------- ----------
Consolidated Income From Continuing
Operations 89,333 39,676 129,009
Dividends/accretion of discount/accretion of
contract payment on preferred stock 1,187 817 2,004
---------- ---------- ---------- ----------
Income Applicable to Common Stock $88,146 $38,859 $127,005
========== ========== ========== ==========
EARNINGS PER COMMON SHARE
Frontier Pro Forma
Historical Combined
Primary:
Income applicable to common stock $88,146 $127,005
Average common shares outstanding 76,163 154,900
---------- ----------
Earnings Per Common Share - Primary $1.16 $.82
========== ==========
Fully Diluted:
Adjusted income applicable to common stock $88,505 $127,364
Adjusted average common shares outstanding 76,682 155,419
---------- ----------
Earnings Per Common Share - Fully Diluted $1.15 $.82
========== ==========
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
</TABLE>
<PAGE>
<PAGE>17
<TABLE>
<CAPTION>
FRONTIER CORPORATION AND ALC COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1992
(In thousands of dollars, Frontier ALC Pro Forma Pro Forma
except per share data) Historical Historical Adjustments Combined
<S> <C> <C> <C> <C>
Revenues and Sales $880,141 $376,064 $1,256,205
---------- ---------- ---------- ----------
Costs And Expenses:
Operating expenses 516,891 325,100 841,991
Cost of goods sold 21,634 21,634
Depreciation 115,682 9,372 125,054
Taxes other than income taxes 44,947 608 45,555
---------- ---------- ---------- ----------
Total Costs and Expenses 699,154 335,080 1,034,234
---------- ---------- ---------- ----------
Operating Income 180,987 40,984 221,971
Interest expense 50,217 17,088 67,305
Other income and expense:
Allowance for funds used during construction 1,309 1,309
Gain (loss) on sale of assets/subsidiaries (699) (699)
Equity earnings (loss) from unconsolidated
interests in wireless interests (661) (661)
Other income (expense), net (13,524) 329 (13,195)
---------- ---------- ---------- ----------
Income Before Taxes 117,894 23,526 141,420
Income taxes 44,067 9,700 53,767
---------- ---------- ---------- ----------
Consolidated Income From Continuing
Operations 73,827 13,826 87,653
Dividends/accretion of discount/accretion of
contract payment on preferred stock 1,188 4,382 5,570
---------- ---------- ---------- ----------
Income Applicable to Common Stock $72,639 $9,444 $82,083
========== ========== ========== ==========
EARNINGS PER COMMON SHARE
Frontier Pro Forma
Historical Combined
Primary:
Income applicable to common stock $72,639 $82,083
Average common shares outstanding 75,348 154,085
---------- ----------
Earnings Per Common Share - Primary $.96 $.53
========== ==========
Fully Diluted:
Adjusted income applicable to common stock $73,009 $82,453
Adjusted average common shares outstanding 75,876 154,613
---------- ----------
Earnings Per Common Share - Fully Diluted $.96 $.53
========== ==========
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
</TABLE>
<PAGE>
<PAGE>18
FRONTIER CORPORATION
Notes to Unaudited Pro Forma Combined Financial Statements
Note 1 - Basis of Presentation:
The unaudited pro forma combined statements of income and balance
sheet reflect Frontier's completed and proposed acquisitions of WCT,
ETI and SCI and the merger with ALC. As required by Rule 11-02 of
Regulation S-X, the unaudited pro forma combined statements of income
first assume the combination of WCT, ETI and SCI, which are to be
accounted for under the purchase method of accounting, as of the
beginning of the most recent fiscal year ended December 31, 1994, and
the three months ended March 31, 1995 and 1994. With respect to WCT
and ETI, the unaudited pro forma combined statements of income reflect
their respective results of operations for the most recent twelve
month period ended December 31, 1994, and for the three months ended
March 31, 1995 and 1994. With respect to SCI, the unaudited pro forma
combined statements of income reflect its historical results of
operations for the year ended December 31, 1994, and for the three
months ended March 31, 1995 and 1994. These pro forma results then
assume the merger with ALC, which is to be accounted for using the
pooling of interests method of accounting, as of the beginning of the
three most recent fiscal years ended December 31, 1994, 1993 and 1992,
and the three months ended March 31, 1995 and 1994, to arrive at the
unaudited pro forma combined statements of income for Frontier. The
unaudited pro forma combined statements of income reflect results of
operations of ALC for the most recent fiscal years ended December 31,
1994, 1993 and 1992, and for the three months ended March 31, 1995 and
1994.
The unaudited pro forma combined balance sheet presents the financial
position of Frontier as of March 31, 1995, assuming that the completed
and proposed acquisitions of WCT, ETI and SCI and the proposed merger
with ALC occurred as of March 31, 1995. Such pro forma information is
based on the historical balance sheets of Frontier, WCT, ETI, SCI and
ALC as of that date.
Frontier's management believes that the assumptions used in preparing
the unaudited pro forma combined financial statements provide a
reasonable basis for presenting all of the significant effects of its
transactions (other than any synergies anticipated by Frontier's
management and nonrecurring charges directly attributable to the merger
with ALC), that the pro forma adjustments give appropriate effect to
those assumptions and that the pro forma adjustments are properly
applied in the unaudited pro forma combined financial statements.
Certain reclassifications have been made to WCT's, ETI's, SCI's and
ALC's historical financial statements to conform to Frontier's
financial statement presentation.
<PAGE>
<PAGE>19
Note 2 - Pro Forma Adjustments:
Unaudited pro forma adjustments consist of the following:
a. Merger with ALC Communications Corporation:
The pro forma adjustment to the balance sheet reflects the
issuance by Frontier of an estimated 78.7 million additional
shares of Frontier common stock in the merger, based on the
assumption that all outstanding ALC stock options and ALC warrants
(other than one series of ALC warrants which are substantially
"out of the money") are exercised for shares of ALC common stock
prior to the merger and using the "treasury stock" method with
respect to the use of the proceeds from such exercises. The pro
forma adjustment to the balance sheet reflects the issuance of
these shares. The pro forma earnings per share calculation for
all periods in which ALC is presented include the 78.7 million
additional shares of Frontier common stock as outstanding for the
entire period.
b. Acquisition of WCT Communications, Inc.:
Frontier exchanged approximately $82.8 million in cash, including
acquisition costs, in return for the stock of WCT. In addition,
an obligation in the amount of $2.5 million for various non-compete
agreements will be paid subsequent to the closing. The transaction
is accounted for using the purchase method of accounting.
The purchase price is allocated to the net assets acquired using
the assumption that the net book basis of the long term assets is
reflective of their fair value. The fair value of the purchased
customer base ($6.7 million) is calculated using a discounted cash
flow of estimated revenues and expenses based on historical data
from WCT and current industry projections. The purchased customer
base is amortized over 5 years. As part of the agreement,
non-compete agreements ($2.5 million) were negotiated and are
amortized over 4 to 5 years. Goodwill ($87.1 million) is
calculated as the difference between the purchase price and the
fair value of the net assets acquired and is amortized over 25
years.
The pro forma adjustment to operating expenses in the statement of
income for the year ended December 31, 1994, and for the three
months ended March 31, 1995 and 1994, represents the amortization
of purchased customer base, non-competes and goodwill. As
Frontier did not have enough cash and cash equivalents as of
January 1, 1994, to complete the transaction without incurring
additional debt, the pro forma adjustment to interest expense in
the statement of income for the year ended December 31, 1994, and
for the three months ended March 31, 1994, reflects the assumed
issuance of approximately $82.8 million in debt securities at
Frontier's effective borrowing rate of 7% as of January 1, 1994.
Frontier's effective borrowing rate of 8.75% as of January 1,
1995, is used to calculate the pro forma adjustment to interest
expense for the three months ended March 31, 1995.
<PAGE>
<PAGE>20
Frontier's statutory tax rate of 35% is used to calculate the tax
effect of the unaudited pro forma combined statement of income
adjustments, excluding the impact of nondeductible goodwill.
c. Acquisition of Enhanced TeleManagement, Inc.:
Frontier will exchange approximately $29 million in cash,
including acquisition costs, in return for the stock of ETI. The
transaction will be accounted for using the purchase method of
accounting.
The purchase price is allocated to the net assets acquired using
the assumption that the net book basis of the long term assets is
reflective of their fair value. The fair value of the purchased
customer base ($1.8 million) is calculated using a discounted cash
flow of estimated revenues and expenses based on historical data
from ETI and current industry projections. The purchased customer
base is amortized over 5 years. Goodwill ($24 million) is
calculated as the difference between the purchase price and the
fair value of the net assets acquired and is amortized over 25
years.
The pro forma adjustment to operating expenses in the statement of
income for the year ended December 31, 1994, and for the three
months ended March 31, 1995 and 1994, represents the amortization
of purchased customer base and goodwill. As Frontier did not have
enough cash and cash equivalents as of January 1, 1994, to
complete the transaction without incurring additional debt, the
pro forma adjustment to interest expense in the statement of
income for the year ended December 31, 1994, and for the three
months ended March 31, 1994, reflects the assumed issuance of
approximately $29 million in debt securities at Frontier's
effective borrowing rate of 7% as of January 1, 1994. Frontier's
effective borrowing rate of 8.75% as of January 1, 1995, is used
to calculate the pro forma adjustment to interest expense for the
three months ended March 31, 1995.
Frontier's statutory tax rate of 35% is used to calculate the tax
effect of the unaudited pro forma combined statement of income
adjustments, excluding the impact of nondeductible goodwill.
d. Acquisition of Schneider Communications, Inc. and LinkUSA
Corporation:
Frontier will exchange approximately $132 million in cash,
including acquisition expenses, in return for the stock of
Schneider Communications, Inc. and its approximately 81% majority
owned subsidiary, LinkUSA Corporation. In addition, an obligation
in the amount of $.2 million for a non-compete agreement will be
paid subsequent to the closing. The transaction will be accounted
for using the purchase method of accounting.
<PAGE>
<PAGE>21
The purchase price is allocated to the net assets acquired using
the assumption that the net book basis of the long term assets is
reflective of their fair value. The fair value of the purchased
customer base ($7.4 million) is calculated using a discounted cash
flow of estimated revenues and expenses based on historical data
from SCI and current industry projections. The purchased customer
base is amortized over 5 years. As part of the agreement,
non-compete agreements ($3.3 million) were negotiated and are
amortized over 5 years. Goodwill ($105.6 million) is calculated
as the difference between the purchase price and the fair value of
the net assets acquired and is amortized over 25 years.
The pro forma adjustment to operating expenses in the statement of
income for the year ended December 31, 1994, and for the three
months ended March 31, 1995 and 1994, represents the amortization
of purchased customer base, non-competes and goodwill. As
Frontier did not have enough cash and cash equivalents as of
January 1, 1994, to complete the transaction without incurring
additional debt, the pro forma adjustment to interest expense in
the statement of income for the year ended December 31, 1994, and
for the three months ended March 31, 1994, reflects the assumed
issuance of approximately $132 million in debt securities at
Frontier's effective borrowing rate of 7% as of January 1, 1994.
Frontier's effective borrowing rate of 8.75% as of January 1,
1995, is used to calculate the pro forma adjustment to interest
expense for the three months ended March 31, 1995.
Frontier's statutory tax rate of 35% is used to calculate the tax
effect of the unaudited pro forma combined statement of income
adjustments, excluding the impact of deductible purchased customer
base, non-compete agreements and goodwill which are tax effected
at SCI's effective tax rate of 40%.
<PAGE>
<PAGE>22
e. Summary of Pro Forma Adjustments:
The following table summarizes the pro forma adjustments reflected
on the unaudited pro forma combined balance sheet for the completed
and proposed transactions outlined above:
<TABLE>
March 31, 1995
<CAPTION>
WCT ETI SCI ALC Total
<S> <C> <C> <C> <C> <C>
Cash:
Paid at closing $82,800 $28,958 $132,037 $243,795
Other 18 18
-------- -------- -------- --------
82,818 28,958 132,037 243,813
Goodwill: 87,060 24,045 105,593 216,698
Deferred and other assets:
Non-compete agreements 2,500 3,300 5,800
Customer base 6,745 1,796 7,410 15,951
Other (974) (974)
-------- -------- -------- --------
8,271 1,796 10,710 20,777
Accounts payable:
Non-compete agreements 2,500 200 2,700
Payables not assumed (1,249) (1,249)
Other 13,975 500 14,475
-------- -------- -------- --------
16,475 500 (1,049) 15,926
Taxes accrued:
Liabilities not assumed (3,588) (3,588)
Deferred income taxes:
Associated with customer base 718 718
Assets not acquired 1,252 1,252
-------- -------- --------
718 1,252 1,970
Other purchase accounting adjustments:
Accounts receivable (7,371) (1) (7,372)
Prepayments and other (110) (110)
Total property, plant and equipment 2,828 2,828
Long-term debt 2,911 2,911
Deferred employee benefit obligations 15 15
Common stock:
Cancelled (23,744) (2,142) (1) (337) (26,224)
Issued 78,737 78,737
-------- -------- -------- -------- --------
(23,744) (2,142) (1) 78,400 52,513
Capital in excess of par value:
Cancelled (1,000) (152,102) (153,102)
Issued 73,702 73,702
-------- -------- --------
(1,000) (78,400) (79,400)
Retained earnings:
Eliminated 12,203 (2,193) (11,349) (1,339)
</TABLE>
<PAGE>
<PAGE>23
The following table summarizes the pro forma adjustments reflected
on the unaudited pro forma combined statements of income for the
completed and proposed transactions outlined above:
<TABLE>
<CAPTION>
WCT ETI SCI ALC Total
Three Months Ended 3/31/95
<S> <C> <C> <C> <C> <C>
Operating expenses:
Amortization $1,351 $330 $1,606 $3,287
Interest 1,811 633 2,889 5,333
Income taxes (634) (221) (1,661) (2,516)
Three Months Ended 3/31/94
Operating expenses:
Amortization 1,351 330 1,606 3,287
Interest 1,449 507 2,310 4,266
Income taxes (507) (177) (1,458) (2,142)
Year Ended 12/31/94
Operating expenses:
Amortization 5,404 1,320 6,424 13,148
Interest 5,796 2,027 9,243 17,066
Income taxes (2,029) (709) (5,834) (8,572)
</TABLE>
Note 3 - Other Matters:
Frontier has learned that it has been named as a defendant, although
not yet served with process, in two lawsuits which purport to be
class actions brought on behalf of all ALC stockholders against ALC
and its directors. The complaints seek, among other things, to
enjoin the business combination and/or to obtain an award of damages.
Frontier's management believes these actions to be without merit and
will defend itself vigorously if and when it has been served with
process.
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (File Nos.
33-40824, 33-69420, 33-61784 and 33-57895), Form S-4 (File No. 33-61992)
and in the Registration Statement on Form S-8 (File Nos. 33-67430,
33-67432, 33-67324, 33-51331, 33-51885, 33-52025, 33-54511, 33-54519
and 33-59579) of Frontier Corporation of our report dated January 16, 1995,
except as to the pooling of interests with American Sharecom, Inc. which
is as of March 17, 1995, and which appears in the Current Report on
Form 8-K of Frontier Corporation dated April 12, 1995.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Rochester, New York
June 2, 1995
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (File Nos.
33-40824, 33-69420, 33-61784 and 33-57895), Form S-4 (File No. 33-61992)
and in the Registration Statements on Form S-8 (File Nos. 33-67430,
33-67432, 33-67324, 33-51331, 33-51885, 33-52025, 33-54511, 33-54519
and 33-59579) of Frontier Corporation of our report dated January 20, 1995
on the consolidated financial statements of ALC Communications Corporation
and subsidiary which is included in the Form 10-K of ALC Communications
Corporation filed with the Securities and Exchange Commission on March 24,
1995, which Form 10-K is incorporated by reference in the Current Report
on Form 8-K of Frontier Corporation dated June 6, 1995.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Detroit, Michigan
June 6, 1995
