Item 1. Business
(a) General Development of Business.
Lincoln Telecommunications Company ("the Company") was incorporated on November 24, 1980, as a Nebraska corporation, and is a holding company, with The Lincoln Telephone and Telegraph Company (Lincoln Telephone), a Delaware corporation, as its principal subsidiary. The Company owns 100% of the issued and outstanding common stock of Lincoln Telephone. Other subsidiaries which are wholly-owned by the Company are LinTel Systems Inc. ("LinTel") and Prairie Communications, Inc. ("Prairie Communications"), both of which are Nebraska corporations. For general development of business during the past five years and descriptions of the subsidiaries, see 1994 Annual Report to Stockholders, pages 1 - 16 and 38 - 46.
(b) Financial Information About Industry Segments.
See 1994 Annual Report to Stockholders, pages 17 - 21.
(c) Narrative Description of Business.
Subsidiary Operations.
Lincoln Telephone, the Company's principal subsidiary, operates a telephone system for both local and long distance service in the southeastern 22 counties of Nebraska, having in service 246,963 landline customer access lines as of December 31, 1994. This is a contiguous geographical area. There are a total of 138 exchanges and 148 central offices (there being ten central offices in Lincoln).
The Lincoln Telephone and Telegraph Company Statistics
As of December 31 ACCESS LINES IN SERVICE* 1994 1993
Residence 177,695 173,477 Business 69,268 64,665 ------- ------- Total 246,963 238,142
*The statistics in this table do not include cellular access lines and Company access lines in service as of the dates shown.
TRAFFIC STATISTICS FOR 12 MONTHS ENDED DECEMBER 31, 1994
Long distance calls completed 109,629,932 Direct Distance Dialed 105,515,793 All other 4,114,139
Form 10-K Item 1. cont'd.
Lincoln Telephone provides access services by connecting the communications networks of interexchange and cellular carriers with the equipment and facilities of end users by use of its public switched networks or through private lines. Access charges, payable by interexchange and cellular carriers, provided $50,570,000, $47,531,000 and $44,458,000 of the Company's consolidated revenues for the years ended December 31, 1994, 1993 and 1992 respectively.
Since 1986, telecommunications companies in Nebraska have been permitted to increase local exchange rates up to 10% in any consecutive 12- month period without review by the Nebraska Public Service Commission (NPSC). However, Lincoln Telephone must provide at least 60 days notice to affected customers and conduct public informational meetings. If at least 3% of all affected subscribers sign a formal complaint within 120 days from such notice, opposing the rate increase, the NPSC must hold and complete a hearing with regard to the complaint within 90 days to determine whether the proposed rates are fair, just and reasonable, and within 60 days after the close of hearing, enter an order adjusting the rates at issue.
Rates for all other services are not subject to regulation by the NPSC. Rates for other services may be revised by a telecommunications company by filing a rate list with the NPSC which is effective after ten days' notice to the NPSC. Quality of service regulation over interexchange and local exchange service is retained by the NPSC. Nebraska has completely deregu- lated the provision of mobile radio services and radio paging services.
Regardless of whether a particular rate increase is subject to regu- latory review, the Company's ability to raise rates will be determined by various factors, including economic and competitive circumstances in effect at the time. See 1994 Annual Report to Stockholders, pages 44 and 45.
Lincoln Telephone's wireless services include cellular operations and wide area paging services. Lincoln Telephone operates a cellular telecommunications system in the Lincoln, Nebraska Metropolitan Statistical Area (MSA). Lincoln Telephone also manages the limited partnership which is the license holder for Iowa Rural Service Area (RSA) 1 which serves the southwestern six counties of Iowa.
On December 31, 1991, Prairie Communications acquired a 50% interest in Omaha Cellular General Partnership (OCGP). The remaining 50% interest in OCGP is owned by Centel Nebraska, Inc. (Centel-Neb). The Company purchased its 50 percent share from Centel Cellular Co. (Centel) for $11.9 million cash and a discount note from OCGP that it holds for $23.8 million, which note proceeds were paid to Centel and Centel Nebraska. For a two- year period beginning on December 31, 1996, Prairie Communications will have an opportunity to purchase Centel's remaining 50 percent interest in OCGP at fair market value. OCGP is the general partner of and holds approximately 55% of the partnership interests in Omaha Cellular Limited Partnership, which provides cellular telecommunications services in Douglas and Sarpy Counties in Nebraska and Pottawattamie County, Iowa. Omaha Cellular Limited Partnership conducts business under the trade name First Cellular Omaha. Prairie Communications is the managing partner of OCGP.
The Company also owns 16.1% of the outstanding shares of Nebraska Cellular Telephone Corporation (NCTC). NCTC is the holder of cellular operating licenses issued by the Federal Communications Commission (FCC) for Nebraska RSA Nos. 533 through 542. Form 10-K Item 1. cont'd.
The following table sets forth certain information about the Company's cellular operations.
(1) Systems are as follows:
Lincoln MSA - Lancaster County, Nebraska Omaha MSA - Douglas and Sarpy Counties in Nebraska and Pottawattamie County in Iowa Nebraska RSAs - 89 of the 90 Nebraska counties not in the Omaha and Lincoln MSAs Iowa RSA 1 - Southwestern six counties of Iowa
(2) The date Lincoln Telephone's operating license was granted in the case of the Lincoln MSA, and the date of the Company's initial acquisition of an interest in the licensee in the case of other systems.
(3) In addition, Prairie Communications has an option to purchase an additional 27.6% interest in the licensee of the Omaha MSA at fair market value.
(4) Includes the allocable portion of the 14.1% interest in the licensee held by the Omaha MSA licensee.
(5) Based upon Donnelley Marketing Information Services population data for 1993. Pops shown for Lincoln and Omaha MSAs are virtually all covered by the networks of these systems. According to estimates available to the Company, approximately 60% of the pops shown for Nebraska RSAs and approximately 90% of the pops shown for Iowa RSA 1 are covered by the networks of these systems.
(6) Does not include the Omaha MSA licensee's 15.2% interest in Iowa RSA 1 (which system has been separately included in the table) or the Omaha MSA licensee's 8.3% interest in Iowa RSA 8 (representing 54,659 pops and 4,537 net pops).
(7) The data regarding the subscribers and net subscribers is not disclosed herein because it is not considered material to the Company's consolidated operations.
The licensing, ownership, construction, operation and sale of controlling interests in cellular telephone systems are subject to regulation by the FCC. The FCC licenses for the Company's Lincoln MSA and Omaha MSA cellular operations expire between October 1994 and October 1996,
Form 10-K Item 1. cont'd. while FCC licenses for the Company's Iowa RSA and Nebraska RSA cellular operations expire between July 1999 and August 2000. All renewal applications for these licenses must be received by the FCC not later than 30 and not more than 60 days in advance of their respective expiration dates and must be approved by the FCC. It is possible that there may be competition for these FCC licenses upon expiration, and any such competitors may apply for such licenses within the same time frame as the Company. However, incumbent cellular providers generally retain their FCC licenses upon a demonstration of substantial compliance with FCC regulations and substantial service to the public. The FCC will only consider competitors' applications if it determines the Company has not made such a demonstration. Although the Company has no reason to believe that the FCC renewal applications will not be granted by the FCC, no assurance can be given.
For a five-year period ending after the date of the grant of a cellular license by the FCC (the "fill-in period"), the licensee has the exclusive right to apply to serve areas within the RSA or the MSA. At the end of the fill-in period, any person may apply to serve the unserved areas in the MSA or RSA. The fill-in period for both the Lincoln and Omaha MSAs has expired and no person has filed to serve any unserved areas in those locations. The fill-in periods for the Nebraska RSAs and the Iowa RSA expire between November 1994 and May 1995.
LinTel is a "reseller" of long distance services, primarily in Lincoln Telephone's exchange service area, and provides this service by aggregating its customers' traffic to take advantage of volume discounts offered by national networks. During 1993, the Company had 114.7 million minutes of long distance traffic, an increase of 8.4 million minutes from 1992. For 1994, the Company had 114.5 million minutes of long distance traffic. The Company has a variety of calling programs for both residential and business customers.
LinTel also sells and services a wide range of PBX, key system and other communications equipment to large and small businesses, including products manufactured by ROLM and Northern Telecom. These systems typically include a variety of special features such as automatic call distribution, voice mail, and LAN functionality.
Nebraska State Income and Local Property Taxes
The Company's property and state income tax obligations during 1992 and 1993 were modified by actions of the Nebraska Legislature and the Nebraska Supreme Court. In 1991, the Nebraska Supreme Court determined in separate actions that Nebraska's personal property tax system as applied to businesses in 1989 and 1990 was unconstitutional. The Court determined that approximately 18.8% of taxes paid for 1990 should be refunded. The NPSC approved a settlement whereby similar refunds were made applicable to 1989 taxes. As a result of these actions, the Company recorded refunds or credits of approximately $1,359,000 and $1,494,000 in 1993 and 1992, respectively.
In view of a constitutional amendment approved by the voters in 1992, the constitutional issues concerning Nebraska property taxes appear to have been resolved.
Form 10-K Item 1. cont'd.
Competition.
Competitors now offer private line and switched voice and data services in or adjacent to the territory served by Lincoln Telephone, thus permitting bypass of local telephone facilities. In addition, satellite transmission services, cellular communications and other services permit bypass of the local exchange network. These alternatives to local exchange service represent a potential threat to Lincoln Telephone's long-term ability to provide local exchange service at economical rates.
In order to meet this competition, Lincoln Telephone has deployed new technology for its local exchange network to increase operating efficiencies and to provide new services to its customers. These new technologies include conversion of all Lincoln Telephone switches to digital technology, installation of over 1,350 miles of fiber optic cable, and installation of SS7, an out-of-band signalling system, to over 60 percent of its access lines.
Lincoln Telephone faces competition in the market for customer premises telephone equipment. Lincoln Telephone offers state-of-the-art customer premises telephone equipment through well-trained and experienced market representatives with long term relationships with customers. In so doing, Lincoln Telephone believes that it effectively competes in this market segment.
With respect to cellular mobile communications service, the FCC has granted two licenses to provide cellular service in each MSA or RSA. One license was granted to a company that provides local telephone service in the area or to a group affiliated with the local service company (the "Wireline Carrier"). The other license was granted to a company that does not provide local telephone service and is not affiliated with a local service company in the area (the "Non-Wireline Carrier"). Lincoln Telephone currently operates as the Wireline Carrier in the Lincoln, Nebraska MSA and Prairie Communications is the manager of the limited partnership which operates as the Wireline Carrier in the Omaha, Nebraska, MSA.
The Company faces significant competition from the Non-Wireline Carrier in such markets and from other communications technologies that now exist, such as specialized mobile radio systems and paging services, or other communications technologies that may be developed or perfected. In addition to providing cellular mobile communications service, the Company sells and leases cellular mobile equipment in competition with numerous equipment retailers. The providers in each market compete for customers principally on the basis of services offered, the quality of customer service and price. The Company has designed and deployed cellular systems with greater radio signal coverage than competitive systems, particularly for portable cellular telephone users. The Company believes it has benefited competitively from such design.
In connection with provision of long distance telecommunications services, LinTel competes with other long distance service providers such as AT&T, MCI, and Sprint. This market is now competitive, and regulation by the FCC and the NPSC has been substantially reduced since divestiture by AT&T of the Bell Operating Companies and the advent of equal access. The prices for long distance services offered by LinTel compare favorably with prices of similar services offered by competitors. Form 10-K Item 1. cont'd.
Since the mid-1980's, the Company's business strategy has been to position itself as a "one-stop" telecommunications services provider. Long-term business relationships with its customers have strengthened the Company's business position. The Company believes that its customers value the fact that it is the "local company" whose goal is to meet the customers' total communications needs.
The long-range effect of competition on the provision of telecommunications services and equipment will depend on technological advances, regulatory actions at both the state and federal levels, court decisions, and possible future state and federal legislation. See 1994 Annual Report to Stockholders, pages 44 and 45.
Employees.
The Company and its subsidiaries employed 1,612 persons (1,392 employed by its principal subsidiary, Lincoln Telephone) at the end of 1994. As of December 1994, approximately 58 percent of the Company's and subsidiaries' employees were represented by the Communications Workers of America (CWA), which is affiliated with the AFL-CIO. New three-year contracts with the CWA were signed in May 1992 as respects LinTel bargaining unit employees and October 1992 as respects Lincoln Telephone bargaining unit employees. The Lincoln Telephone contract with the CWA will expire on October 14, 1995, and the LinTel contract with the CWA will expire on May 19, 1995. The Company believes its relationship with its employees is good and constructive. See 1994 Annual Report to Stockholders, pages 47 and 48, for eleven-year figures.
(d) Financial Information About Foreign and Domestic Operations and Export Sales.
Not applicable.
Item 2.
Item 2. Properties
Lincoln Telephone's telephone system consists of switching and transmission equipment, cellular radio facilities, fiber optic systems and distribution plant, through 138 communities within the state of Nebraska. Among the larger exchanges served are Lincoln, Hastings, Beatrice, York, Nebraska City, Plattsmouth and Seward.
For fiscal year 1994, Lincoln Telephone owned the equipment, plant and facilities which were utilized in its telephone system. Lincoln Telephone leases four locations on which business offices are located. The total annual rentals for such leased offices are less than $100,000 and the duration of such leases range from one to six years. Lincoln Telephone owns its remaining business office locations. Additionally, Lincoln Telephone leases the majority of the locations on which the sites of towers for its Lincoln MSA cellular system are located. Annual rentals on the sites are approximately $40,000, and the duration of the unexpired portions of such leases range from four months to five years, with options to renew thereafter.
LinTel leases transmission facilities and switching facilities in connection with its Lincoln Telephone Long Distance Division. All of its office locations are leased. Annual rentals are approximately $131,000, and the duration of the unexpired portions of such leases range from four Form 10-K Item. 2. cont'd.
months to four years.
It is the opinion of Company management, including the Engineering Director of Lincoln Telephone, that the properties of Lincoln Telephone are suitable and adequate to provide modern and effective telecommunications services within its franchised area, including both local and long distance service. The capacity for furnishing these services, both currently and for forecast growth, are under constant surveillance by the Engineering Director and his staff. Facilities are put to full utilization after installation and appropriate testing, according to two-, three- and five-year construction plans.
Lincoln Telephone's continuing construction programs are divided between meeting growth demands (population and service) and upgrading its telephone equipment and plant. Conversion to digital switching systems was completed in 1992.
Item 3.
Item 3. Legal Proceedings
None.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
Executive Officers of Registrant First Elected Officer Age Position Held Present Office
Frank H. Hilsabeck 50 President & Chief Executive Officer 1993 (President & Chief Operating Officer, 1991-1993; President-Telephone Operations, 1990-1991)
James W. Strand 48 President-Diversified Operations 1990
Jack H. Geist 62 V. P.-Diversified Operations 1993 (President, Anixter-Lincoln, a joint venture (1989-1994)
Robert L. Tyler 59 Senior V.P. and Chief Financial 1991 Officer (V.P.-Controller, 1989-1991)
Michael J. Tavlin 48 V.P.-Treasurer and Secretary 1986
Form 10-K PART II
Item 5.
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters
(a) Market Information
Company Common Stock is traded on the Nasdaq National Market under the symbol "LTEC." The following table sets forth the high and low bid quotations for the periods indicated, as reported in "The Wall Street Journal." These quotations represent prices between dealers without adjustments for markups, markdowns or commissions and may not represent actual transactions.
High Low Dividends Declared First Quarter 13.50 12.00 .12 Second Quarter 14.50 12.50 .12 Third Quarter 18.75 13.63 .12 Fourth Quarter 20.50 17.50 .13 First Quarter 20.00 15.50 .13 Second Quarter 16.75 13.75 .13 Third Quarter 16.75 13.75 .13 Fourth Quarter 17.50 14.00 .14
(b) Holders
As of December 31, 1994, there were approximately 15,000 holders of record of the Company's Common Stock. Such number does not include beneficial owners of the Company's Common Stock, whose shares are held in the names of broker dealers and clearing agencies.
(c) Dividends
The long-term debt agreements of Lincoln Telephone contain various restrictions, including those relating to payment of dividends by Lincoln Telephone to the Company and to holders of Lincoln Telephone's 5% Preferred Stock. Notes payable to banks also contain various restrictions. At December 31, 1994, approximately $34,861,000 of Lincoln Telephone's retained earnings were available for payment of cash dividends to the Company and to holders of Lincoln Telephone's 5% Preferred Stock under the most restrictive provisions of such agreements.
Item 6.
Item 6. Selected Financial Data
See 1994 Annual Report to Stockholders, pages 47 and 48.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
See 1994 Annual Report to Stockholders, pages 38 - 46.
Form 10-K Item 7. cont'd.
On March 17, 1993, the Board of Directors elected to expense the entirety of the Company's post-retirement benefit obligation accumulated as of January 1, 1993, of approximately $38,450,000 in the first quarter of 1993 for financial reporting purposes. This obligation, net of related income taxes, amounted to $23,166,000. This one-time charge equals $0.71 per share of Common Stock, net of tax impact. This action was taken in compliance with Statement of Financial Accounting Standards No. 106, which imposes new accounting rules regarding insurance and other benefits provided to retirees and allows employers to recognize this obligation either immediately or on an amortized basis.
Recent Developments
(a) On March 16, 1994, the Company announced that due to changes in technology, customer growth and usage demand for cellular services in their respective markets, Lincoln Telephone Cellular and First Cellular Omaha have entered into an agreement with AT&T to purchase digital cellular telephone systems to replace the existing analog systems serving these markets. These digital systems are expected to increase capacity and performance in these markets. The new Omaha system was operational in April 1994, and the Lincoln system is expected to be operational in April 1995.
The implementation of these system upgrades will cause the early retirement of existing analog equipment prior to the expiration of its anticipated useful life. As a result, Lincoln Telecommunications, in the first quarter of 1994, wrote down the value of these assets. This write down resulted in a one-time, non-cash reduction of first quarter 1994 earnings of approximately $3,761,000, or $0.11 per share.
(b) On March 21, 1995, the Company, Capital Acquisition Corp., a Nebraska corporation and wholly-owned subsidiary of the Company (Subsidiary) and Nebraska Cellular Telephone Corporation, a Nebraska corporation (NCTC) entered into an Agreement and Plan of Reorganization (the Merger Agreement) pursuant to which NCTC will merge with and into Subsidiary and thereby the Company will acquire the approximately 84% of NCTC Commom Stock not currently owned by the Company (the Merger).
The Merger Agreement provides, among other things, that at the effective time of the Merger, each share of NCTC Common Stock, other than shares owned by the Company, will be converted into the right to receive, at the election of the holder, either (i) one share of Company Common Stock, plus $4.00 in cash, or (ii) $20.00 cash, subject to certain provisions limiting the amount of Company Common Stock to be issued in the Merger to 5,196,000 shares. Total consideration of Company Common Stock and cash to be issued in the Merger is valued at approximately $130 million.
Closing of the transaction is subject to the approval of the share- holders of NCTC and the approvals of the Federal Communications Commission and the Federal Trade Commission, as well as certain other conditions set forth in the Merger Agreement. NCTC may Form 10-K Item 7. cont'd.
terminate the Merger Agreement if the average of the last reported sales price per share of Company Common Stock as reported on the Nasdaq National Market for the twenty (20) consecutive trading days immediately preceding the fifth business day prior to the closing of the Merger is less than $13.75 per share.
Set forth below is certain financial and operating data regarding the cellular operations of the Company and NCTC.
Operating Characteristics of Cellular Properties Proportionate Data - Unaudited
COMPANY DATA NCTC --------------------------------- ---- Lincoln Omaha 12/31 MSA MSA Iowa RSA Ownership 100.0% 27.6% 11.8%
POPS 1994 221,000 172,224 7,316 834,000 1993 221,000 172,224 7,316 834,000 1992 220,000 169,740 7,316 834,000
Customer Lines 1994 20,755 8,991 243 56,100 1993 13,145 5,972 128 24,090 1992 7,573 3,706 29 11,491
Service Revenues (1) 1994 $ 10,176 $ 4,563 $ 126 $ 23,418 in thousands 1993 $ 6,473 $ 3,094 $ 80 $ 13,063 1992 $ 4,265 $ 2,178 $ 41 $ 8,026
Operating Expenses (2) 1994 $ 5,837 $ 2,985 $ 109 $ 18,355 in thousands 1993 $ 4,468 $ 2,044 $ 71 $ 8,954 1992 $ 3,118 $ 1,563 $ 33 $ 5,529
Net Operating Income 1994 $ 4,339 $ 1,578 $ 17 $ 5,063 in thousands 1993 $ 2,005 $ 1,050 $ 9 $ 4,109 1992 $ 1,147 $ 615 $ 8 $ 2,497
Operating Margin (3) 1994 42.6% 34.6% 13.5% 21.6% 1993 31.0% 33.9% 11.3% 31.5% 1992 26.9% 28.2% 19.5% 31.1%
Penetration Rate 1994 9.4% 5.2% 3.3% 6.7% 1993 5.9% 3.5% 1.7% 2.9% 1992 3.4% 2.2% 0.4% 1.4%
Average Monthly 1994 $ 50.03 $ 50.83 $ 56.60 $ 48.67 Customer Revenue (4) 1993 $ 52.07 $ 53.28 $ 84.93 $ 61.19 1992 $ 57.21 $ 57.75 $ 235.63 $ 82.91
NOTES: (1) Represents all service revenues net of out-bound roamer expenses and ex- cludes equipment sales. The proportionate data for Omaha MSA and Iowa RSA summarized above reflects the Company's ownership levels in these markets. The Company's ownership interest in Iowa RSA was 11.8% in 1994, up from 11.0% in 1993 and 1992.
Form 10-K Item 7. cont'd.
(2) Operating Expenses exclude depreciation, amortization, income tax and interest. (3) Operating margin represents Net Operating Income as a percent of service revenues. (4) Represents service revenue divided by 12 in relation to average customer lines (beginning and end of year average).
Item 8.
Item 8. Financial Statements and Supplementary Data
See 1994 Annual Report to Stockholders, pages 18 - 37 and 47 - 48.
Item 9.
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
None
Form 10-K PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
See Proxy Statement for Annual Meeting of Stockholders, April 2 26, 1995, pages 2-6. See also 1994 Annual Report to Stockholders, page 49.
TERM OF OFFICE OF ABOVE NAMED EXECUTIVE OFFICERS: At the meeting of the Board of Directors each year held immediately following the Annual Meeting of Stockholders, the officers are elected to serve for the ensuing year, or until their successors are duly elected and qualified.
Compliance with Section 16(a) of the Exchange Act
See Proxy Statement for Annual Meeting of Stockholders, April 26, 1995, page 13.
Item 11.
Item 11. Executive Compensation
See Proxy Statement for Annual Meeting of Stockholders, April 26, 1995, pages 7 - 11.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security ownership of certain beneficial owners.
See Proxy Statement for Annual Meeting of Stockholders, April 26, 1995, pages 1 and 2.
(b) Security ownership of management.
See Proxy Statement for Annual Meeting of Stockholders, April 26, 1995, pages 5 and 6.
(c) Changes in control.
None.
Form 10-K Item 13.
Item 13. Certain Relationships and Related Transactions
(a) Transactions with management and others.
On February 1, 1994, the Company entered into an agreement (Agreement) with Sahara Enterprises, Inc. (Sahara), then an owner of approximately 16.6% of the issued and outstanding common stock of the Company in connection with a firm commitment underwritten public offering of shares of the Company's common stock by Sahara (Offering). The Agreement provides (i) the Company with a right of first refusal to purchase additional shares of Company common stock from Sahara for 120 days following the closing of the Offering; (ii) that, concurrently with the closing of the Offering, the Company will purchase 250,000 shares of Company common stock from Sahara at the Offering price less 2 percent for future use in funding the Company's stock obligations under one or more of its employee benefit plans; and (iii) that Sahara will indemnify and reimburse the Company against payment of an amount not to exceed the first $200,000 of the Company's out-of-pocket expenses in connection with the Offering.
On February 1, 1994, the Company filed a Form S-3 Registration Statement with the Securities and Exchange Commission in connection with the Offering. On March 24, 1994, the Offering was closed and pursuant thereto, Sahara sold 1,850,000 shares of Company common stock to the public, reducing its ownership of the issued and outstanding Company common stock to approximately 10%. Concurrently therewith and pursuant to the Agreement, the Company purchased 250,000 shares of Company common stock from Sahara for a purchase price of $15.68 per share, a transaction which the Company financed with current assets. On April 12, 1994, Sahara sold an additional 136,000 shares of the Company's Common Stock to the public in connection with an over-allocation option which Sahara had granted in connection with the offering. Exclusive of shares of common stock received by Sahara pursuant to Company stock dividends or stock splits, Sahara (or its wholly-owned subsidiary) beneficially owned the shares sold in the Offering and the 250,000 shares sold to the Company concurrently therewith since the Company's formation as a holding company effective February 23, 1981.
See Proxy Statement for Annual Meeting of Stockholders, April 26, 1995, pages 5 and 6.
(b) Certain business relationships.
See Proxy Statement for Annual Meeting of Stockholders, April 26, 1995, pages 3 and 4.
(c) Indebtedness of management.
Not applicable.
(d) Transactions with promoters.
Not applicable.
Form 10-K PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements: Independent Auditors' Report Consolidated Balance Sheets, December 31, 1994 and 1993 Consolidated Statements of Earnings, Years ended December 31, 1994, 1993, and 1992 Consolidated Statements of Stockholders' Equity Years ended December 31, 1994, 1993, and 1992 Consolidated Statements of Cash Flows Years ended December 31, 1994, 1993, and 1992 Notes to Consolidated Financial Statements, December 31, 1994, 1993, and 1992 Management's Discussion and Analysis of Financial Conditions and Results of Operations Statements listed in (a) 1 are all incorporated by reference, 1994 Annual Report to Stockholders, pages 17 - 48.
2. Financial Statement schedules required by Item 8 of this form.
Schedule Independent Auditors' Report
Condensed Financial Information of Parent Company: Balance Sheets - December 31, 1994 and 1993 Statements of Earnings - Years ended December 31, 1994, 1993 and 1992 Statements of Stockholders' Equity - Years ended December 31, 1994, 1993 and 1992 Statements of Cash Flows - Years ended December 31, 1994, 1993 and 1992 I
Valuation and Qualifying Accounts - Years ended December 31, 1994, 1993 and 1992 II
All other schedules are omitted because they are not applicable or the information required is immaterial or is presented within the consolidated financial statements and notes thereto.
Form 10-K Item 14. (a) cont'd.
3. Exhibits Required by Item 601 of Regulation S-K
Exhibit 2: Agreement and Plan of Reorganization, dated as of March 21, 1995 by and among the Company, Capital Acquisition Corp., a Nebraska corporation and a wholly-owned subsidiary of the Company and Nebraska Cellular Telephone Corporation, a Nebraska corporation.
Exhibit 3: Articles of Incorporation and By-Laws
(3.1) Articles of Incorporation with amendments (incorporated by reference to Exhibit 3 of the Company's Form S-3 Registration Statement No. 33- 52117).
(3.2) By-Laws as amended March 16, 1994 (incorporated by reference to Exhibit 3.2 of the Company's Annual Report on Form 10-K for the year ending December 31, 1993).
Exhibit 4: Instruments defining the rights of security holders, including indentures
(4.1) Rights Agreement, dated as of June 21, 1989, between the Company and Harris Trust and Savings Bank (incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K dated June 21, 1989).
(4.2) Amendment to Rights Agreement, dated as of September 7, 1989, between the Company and Harris Trust and Savings Bank (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K dated September 7, 1989).
(4.3) Amendment No. 2 to Rights Agreement dated June 15, 1993, between the Company and Mellon Securities Trust Company (incorporated by reference to Exhibit 4.5 of the Company's Form S-3 Registration Statement No. 33-52117.
(4.4) The Indenture issued by The Lincoln Telephone and Telegraph Company (incorporated by reference to Exhibit 4.4 to the Company's Annual Report on Form 10-K for the year ending December 31, 1993).
(4.5) Supplemental Indenture Eleven dated June 1, 1990, (incorporated by reference to the Company's Annual Report on Form 10-K for the year ending December 31, 1990).
Form 10-K Item 14. (a) cont'd.
Exhibit 10: Material Contracts
(10.1) The 1989 Stock and Incentive Plan approved by the Corporation's stockholders on April 26, 1989, was filed as an exhibit to Form S-8, File 33-39551, effective March 22, 1991, and is incorporated herein by this reference.
(10.2) A specimen of the Executive Benefit Plan agreement, as amended through January 1, 1993, provided to the executive officers and director- level managers of the Corporation and its affiliates, and a specimen of the Key Executive Employment and Severance Agreement provided to the executive officers of the Corporation and its affiliates on December 23, 1987, were filed as Exhibit 10 to the Company's 1992 Form 10-K Report and are incorporated herein by reference.
Exhibit 13: Annual Report to Security Holders
(13.1) Filed as an exhibit to this Report on Form 10-K and incorporated as indicated herein by reference.
Exhibit 21: Subsidiaries of the Registrant.
The Company owns all the outstanding common stock of The Lincoln Telephone and Telegraph Company, LinTel Systems Inc., and Prairie Communications, Inc. See pages 42 - 45, 1994 Annual Report to Stockholders.
Exhibit 23: Accountants' Consent
(23.1) Accountants' consent is attached hereto.
Exhibit 27: Financial Data Schedule
Exhibits 9, 11, 12, 16, 18, 22, 24 and 28 are not applicable.
(b) No reports on Form 8-K have been filed during the last quarter of the period covered by this report.
(c) All exhibits required by Item 601 of Regulation S-K are as indicated in paragraph (a) 3 above.
(d) Not applicable.
Form 10-K SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
LINCOLN TELECOMMUNICATIONS COMPANY
/s/ Michael J. Tavlin March 15, 1995 By-------------------------------------------- Date ------------------- Michael J. Tavlin, Vice President-Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date
President and Chief /s/ Frank H. Hilsabeck Executive Officer ____________________________ (Principal Executive Officer) Frank H. Hilsabeck Senior Vice President and /s/ Robert L. Tyler Chief Financial Officer ____________________________ (Principal Financial and Robert L. Tyler Accounting Officer)
/s/ Michael J. Tavlin Vice President - Treasurer ____________________________ and Secretary Michael J. Tavlin
/s/ Duane W. Acklie ____________________________ Director Duane W. Acklie
/s/ William W. Cook, Jr. ____________________________ Director William W. Cook, Jr.
/s/ Terry L. Fairfield ____________________________ Director March 15, 1995 Terry L. Fairfield
/s/ James E. Geist ____________________________ Director James E. Geist
/s/ J. Taylor Greer ____________________________ Director J. Taylor Greer
/s/ John Haessler ____________________________ Director John Haessler
/s/ Charles R. Hermes ____________________________ Director Charles R. Hermes
Form 10-K SIGNATURES (cont'd)
____________________________ Director Donald H. Pegler, Jr.
/s/ Paul C. Schorr, III ____________________________ Director Paul C. Schorr, III
/s/ William C. Smith ____________________________ Director William C. Smith
/s/ James W. Stand ____________________________ Director James W. Stand
/s/ Charles N. Wheatley ____________________________ Director Charles N. Wheatley
/s/ Thomas C. Woods, III ____________________________ Director Thomas C. Woods, III
____________________________ Director Lyn Wallin Ziegenbein
Form 10-K Exhibit Index
Exhibit Title Page No.
2 Agreement and Plan of Reorganization, dated as of March 21, 1995 by and among the Company, Capital Acquisition Corp., a Nebraska corporation and a wholly-owned subsidiary of the Company and Nebraska Cellular Telephone Corporation, a Nebraska corporation. *
3.1 Articles of Incorporation with amendments (incorporated by reference to Exhibit 3 of the Company's Form S-3 Registration Statement No. 33-52117). *
3.2 By-Laws as amended March 16, 1994 (incorporated by re- ference to Exhibit 3.2 of the Company's Annual Report on Form 10-K for the year ending December 31, 1993). *
4.1 Rights Agreement, dated as of June 21, 1989, between the Company and Harris Trust and Savings Bank (incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K dated June 21, 1989). *
4.2 Amendments to Rights Agreement, dated as of September 7, 1989, between the Company and Harris Trust and Savings Bank (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K dated September 7, 1989). *
4.3 Amendment No. 2 to Rights Agreement dated June 15, 1993, between the Company and Mellon Securities Trust Company (incorporated by reference to Exhibit 4.5 of the Company's Form S-3 Registration Statement No. 33-52117). *
4.4 Indenture issued by The Lincoln Telephone and Telegraph Company (incorporated by reference to Exhibit 4.4 to the Company's Annual Report on Form 10-K for the year ending December 31, 1993). *
4.5 Supplemental Indenture Eleven dated June 1, 1990 (incorporated by reference to the Company's Annual Report on Form 10-K for the year ending December 31, 1990). *
10.1 The 1989 Stock and Incentive Plan (incorporated by reference to Form S-8, File 33-39551). *
10.2 Specimen of Executive Benefit Plan (incorporated by reference to Exhibit 10 to the Company's 1992 Form 10-K). *
13 Annual Report to Security Holders *
21 Subsidiaries of Registrant *
23 Accountant's Consent
27 Financial Data Schedule
*Incorporated by reference.
KPMG Peat Marwick LLP
233 South 13th Street, Suite 1600 Lincoln, NE 68508-2041
Two Central Park Plaza Suite 1501 Omaha, NE 68102
ACCOUNTANT'S CONSENT
The Board of Directors Lincoln Telecommunications Company:
We consent to the incorporation by reference in the registration statement on Forms S-3 and S-8 of Lincoln Telecommunications Company of our report, dated February 3, 1995, relating to the consolidated balance sheets of Lincoln Telecommunications Company and subsidiaries as of December 31, 1994 and 1993, and related consolidated statements of earnings, stockholders' equity and cash flows and relating to the schedules to Form 10-K for each of the years in the three-year period ended December 31, 1994, which reports appear in the December 31, 1994 annual report on Form 10-K of Lincoln Telecommunications Company.
/s/ KPMG Peat Marwick LLP
March 15, 1995 Lincoln, Nebraska
KPMG
LINCOLN TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
Independent Auditors' Report and Schedules Form 10-K Securities and Exchange Commission
December 31, 1994, 1993 and 1992
(With Independent Auditors' Report Thereon)
LINCOLN TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
Index to Schedules Filed
Schedule
Independent Auditors' Report
Condensed Financial Information of Parent Company: Balance Sheets - December 31, 1994 and 1993 Statements of Earnings - Years ended December 31, 1994, 1993 and 1992 Statements of Stockholders' Equity - Years ended December 31, 1994, 1993 and 1992 Statements of Cash Flows - Years ended December 31, 1994, 1993 and 1992 I
Valuation and Qualifying Accounts - Years ended December 31, 1994, 1993 and 1992 II
All other schedules are omitted because they are not applicable or the information required is immaterial or is presented within the consolidated financial statements and notes thereto.
KPMG Peat Marwick LLP
233 South 13th Street, Suite 1600 Lincoln, NE 68508-2041
Two Central Park Plaza Suite 1501 Omaha, NE 68102
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders Lincoln Telecommunications Company:
Under date of February 3, 1995, we reported on the consolidated balance sheets of Lincoln Telecommunications Company and Subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of earnings, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1994, as contained in the 1994 annual report to stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year ended December 31, 1994. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related financial statement schedules as listed in the accompanying index. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
Lincoln, Nebraska February 3, 1995
Schedule I
(continued)
Schedule I,cont.
(continued)
Schedule I,cont.
(continued)
Schedule I,cont.
Schedule II
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 11-K
X Annual Report pursuant to Section 15(d) ----- of the SECURITIES EXCHANGE ACT of 1934 [Fee Required]
For the Fiscal Year Ended December 31, 1994
Or
Transition Report pursuant to Section 15(d) ----- of the SECURITIES EXCHNAGE ACT of 1934 [No Fee Required]
A. Full title of the Plan and the address of the Plan, if different from that of the issuer named below:
LINCOLN TELECOMMUNICATIONS COMPANY EMPLOYEE AND STOCKHOLDER DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN, AS AMENDED
B. Name of issuer of the securities held pusuant to the Plan and the address of its principal executive office:
LINCOLN TELECOMMUNICATIONS COMPANY 1440 M Street P.O. Box 81309 Lincoln, Nebraska 68501-1309 (402) 474-2211
KPMG
LINCOLN TELECOMMUNICATIONS COMPANY EMPLOYEE AND STOCKHOLDER DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
Financial Statements Form 11-K Securities and Exchange Commission
December 31, 1994, 1993 and 1992
(With Independent Auditors' Report Thereon)
LINCOLN TELECOMMUNICATIONS COMPANY EMPLOYEE AND STOCKHOLDER DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
Independent Auditors' Report
Statements of Financial Condition - December 31, 1994 and 1993
Statements of Revenues and Common Stock Purchases - Years ended December 31, 1994, 1993 and 1992
Notes to Financial Statements - December 31, 1994, 1993 and 1992
All schedules are omitted because they are not applicable.
KPMG Peat Marwick LLP
233 South 13th Street, Suite 1600 Lincoln, NE 68508-2041
Two Central Park Plaza Suite 1501 Omaha, NE 68102
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders Lincoln Telecommunications Company:
We have audited the financial statements of Lincoln Telecommunications Company Employee and Stockholder Dividend Reinvestment and Stock Purchase Plan as listed in the accompanying index. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Lincoln Telecommunications Company Employee and Stockholder Dividend Reinvestment and Stock Purchase Plan at December 31, 1994 and 1993, and its revenues and common stock purchases for each of the years in the three-year period ended December 31, 1994, in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Lincoln, Nebraska February 3, 1995
LINCOLN TELECOMMUNICATIONS COMPANY EMPLOYEE AND STOCKHOLDER DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
Notes to Financial Statements
December 31, 1994, 1993 and 1992
(1) STATEMENT OF PURPOSE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Lincoln Telecommunications Company Employee and Stockholder Dividend Reinvestment and Stock Purchase Plan (Plan) provides stockholders and eligible employees of Lincoln Telecommunications Company (Company) and its subsidiaries with a convenient and economical way to invest cash dividends and optional cash contributions to purchase additional shares of common stock of the Company.
Shares are offered for purchase to all stockholders and all regular full-time and regular part-time employees of the Company with not less than six months of service. Any individual who owns 5 percent or more of the total combined voting power of value of all classes of stock of the Company is not eligible to participate in the Plan.
The Company paid, on January 6, 1994, a 100% stock dividend to stockholders of record on December 27, 1993.
The accompanying financial statements have been prepared on an accrual basis and present the financial condition of the Plan and its revenues and common stock purchases. All assets are held for the purchase of common stock of the Company.
Effective on June 15, 1993, Mellon Securities Trust Company became the transfer agent, registrar, rights agent and Plan administrator. Prior to that date, the Company was the transfer agent, registrar and Plan administrator and Harris Trust and Savings Bank was the rights agent.
(2) PARTICIPATION
Stock for the Plan is purchased on the open market. The basis for the purchase price of the stock allocated to the Plan participants is the average price paid during the 5-day trading period preceding and including the dividend payment date. Employee purchases are at 95% of such price while purchases by non-employee participants are at 100% of such price.
Participants in the Plan may use cash dividends declared on stock owned and optional cash contributions to purchase additional stock. Any contributions received by approximately eight days before the end of each calendar quarter will be used to purchase shares of stock as of the next dividend date.
Shares purchased in the open market for the Plan aggregated 112,423, 115,208 and 121,272 during 1994, 1993 and 1992, respectively. At December 31, 1994, the agent for the Plan held 1,144,193 shares registered for participants.
(3) INCOME TAXES
No provision is made for income taxes relating to the operations of the Plan. Any income tax consequences of participation in the Plan are that of the participants.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the plan) have duly caused this annual report to be signed by the undersigned thereunto duly authorized.
LINCOLN TELECOMMUNICATIONS COMPANY EMPLOYEE AND STOCKHOLDER DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN ------------------------------------ (Name of Plan)
/s/ Michael J. Tavlin By ___________________________ Vice President-Treasurer
Date March 15, 1995 ------------------