EX-99.5 24 a2105878zex-99_5.txt EXHIBIT 99.5 EXHIBIT 99.5 UNITED STATES CELLULAR TELEPHONE OF GREATER TULSA, L.L.C. 2000 FINANCIAL STATEMENTS 2 UNITED STATES CELLULAR TELEPHONE OF GREATER TULSA, L.L.C. BALANCE SHEET DECEMBER 31, 2000 ASSETS Cash and cash equivalents $ 6,740 Accounts receivable Customers, less allowance of $602,101 7,256,909 Affiliates 861,244 Roaming 2,913,674 Other 17,190 Inventory 941,024 Other current assets 207,288 ------------- Total current assets 12,204,069 Property, plant and equipment, net of accumulated depreciation of $36,769,480 53,435,794 Other deferred charges, net of accumulated amortization of $148,379 132,873 Investment in licenses, net of accumulated amortization of $4,948,405 20,947,697 ------------- Total assets $ 86,720,433 ============= LIABILITIES AND MEMBERS' EQUITY Accounts payable and accrued expenses $ 9,845,017 Accounts payable - affiliates 3,797,109 Notes payable - affiliate 25,172,150 Current maturities of long-term debt - affiliate 2,153,667 Deferred revenues and customer deposits 2,400,937 Other current liabilities 2,402,676 ------------- Total current liabilities 45,771,556 Deferred revenues and other deferred credits 2,014,131 Long-term debt - affiliate 1,615,250 ------------- Total liabilities 49,400,937 Members' equity 37,319,496 ------------- Total liabilities and members' equity $ 86,720,433 =============
3 UNITED STATES CELLULAR TELEPHONE OF GREATER TULSA, L.L.C. STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000 Revenues $ 88,756,738 Expenses: Cost of equipment sold 5,932,647 System operations 22,387,162 Marketing and selling 21,594,449 General and administrative 19,827,520 Depreciation and amortization 10,679,225 ------------ Total expenses 80,421,003 ------------ Operating income 8,335,735 Interest expense - affiliate (1,972,710) Other income (expense), net 15,448 ------------ Net income before cumulative effect of a change in accounting principle 6,378,473 Cumulative effect of a change in accounting principle (962,572) ------------ Net income $ 5,415,901 ============
4 UNITED STATES CELLULAR TELEPHONE OF GREATER TULSA, L.L.C. STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2000 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 5,415,901 Add (deduct) adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,679,225 Cumulative effect of accounting change 962,572 Loss on disposal 10,587 Change in accounts receivable (3,352,458) Change in inventory (776,897) Change in accounts payable and accrued expenses 4,684,910 Change in deferred revenues, deferred credits and customer deposits 799,714 Change in other assets and liabilities (694,193) ------------ Net cash provided by operating activities 17,729,361 ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Change in notes payable-affiliate 5,829,100 Change in long-term debt-affiliate (2,153,667) Capital distributions (9,188,200) ------------ Net cash required for financing activities (5,512,767) ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Net additions to property, plant and equipment (12,460,975) ------------ Net cash required for investing activities (12,460,975) ------------ NET DECREASE IN CASH AND CASH EQUIVALENTS (244,381) CASH AND CASH EQUIVALENTS Beginning of period 251,121 ------------ End of period $ 6,740 ============
5 UNITED STATES CELLULAR TELEPHONE OF GREATER TULSA, L.L.C. STATEMENT OF CHANGES MEMBERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 2000
United States Cellular Operating Independent Tulsa General Company of Cellular North Carolina Partner, Inc. Tulsa, Inc. Telephone,L.L.C. RSA #4, Inc. Total ------------- ------------------ ---------------- -------------- ------------ Members' equity, December 31, 1999 $ 414,969 $ 14,383,178 $ 18,265,254 $ 8,028,394 $ 41,091,795 Capital distributions (92,904) (4,495,635) (4,084,102) (515,559) (9,188,200) 2000 Net income 54,701 2,650,000 2,407,368 303,832 5,415,901 ------------- ------------------ ---------------- -------------- ------------ Members' equity, December 31, 2000 $ 376,766 $ 12,537,543 $ 16,588,520 $ 7,816,667 $ 37,319,496 ============= ================== ================ ============== ============
6 UNITED STATES CELLULAR TELEPHONE OF GREATER TULSA, L.L.C. NOTES TO FINANCIAL STATEMENTS (1) ORGANIZATION: United States Cellular Telephone Company (Greater Tulsa) (the "Partnership") was formed on February 24, 1984, under the laws of the State of Oklahoma for the purpose of providing cellular telephone service in the Tulsa, Oklahoma Metropolitan Statistical Area ("MSA"). On February 1, 1994, the Partnership acquired 100% of the stock of Oklahoma RSA #6, Inc. (the "Corporation") at which time the Corporation was dissolved and its assets and liabilities were distributed to the Partnership. The Corporation was a wholly-owned subsidiary of United States Cellular Corporation ("USCC"). The assets and liabilities were recorded at historical cost by the Partnership. This acquisition allows the Partnership to provide cellular telephone service in the Oklahoma Rural Service Area ("RSA") NO. 6. On May 31, 1995, North Carolina RSA #4, Inc. ("NC RSA 4") contributed all its right, title, and interest in the Oklahoma RSA No. 4 ("OK RSA 4") Federal Communications Commission wireline authorization (serving Craig, Nowatta, Ottawa and Washington counties) to the Partnership for a 5.61% interest. The contribution reduced the ownership percentage of United States Cellular Operating Company of Tulsa, Inc. ("USCOC of Tulsa") from 54.54% to 48.93%. The remaining partners agreed to make cash contributions to the Partnership to maintain their respective partnership interests. Prior to December 31, 1997, Independent Cellular Telephone Company, Inc. ("ICTC"), an Oklahoma corporation, and Independent Cellular Telephone Company ("ICTLP"), an Oklahoma limited partnership, reorganized their respective ownership structures. ICTLP was dissolved and liquidated and the 44.45% limited partner interest in the Partnership held by ICTLP was acquired by Independent Cellular Telephone, L.L.C. ("ICTLLC"), an Oklahoma limited liability company. On December 31, 1997, ICTLLC, Tulsa General Partner, Inc., ("TGP") USCOC of Tulsa and NC RSA 4 entered into a Sixth Amendment to the Certificate and Agreement of Limited Partnership pursuant to which ICTLLC was admitted as a partner in the Partnership, the Partnership elected to be governed by the Oklahoma Revised Uniform Limited Partnership Act rather than by the Oklahoma Uniform Limited Partnership Act and the Partnership changed its name to "United States Cellular Telephone Company (Greater Tulsa), L.P." The Partnership filed an Amended Certificate of Oklahoma Limited Partnership with the Oklahoma Secretary of State on December 31, 1997. Immediately thereafter, Articles of Organization were filed with the Oklahoma Secretary of State forming United States Cellular Telephone of Greater Tulsa, L.L.C. (the "Company"), an Oklahoma limited liability company, with each partner of the Partnership holding a membership interest in the Company equal in percentage to its respective partnership interest in the Partnership. In addition, the members of the Company entered into a Limited Liability Company Agreement dated as of December 31, 1997 (the "Initial LLC Agreement"). 7 Upon its formation, the Company entered into an Agreement of Merger, dated as of December 31, 1997, with the Partnership. Pursuant to the Agreement of Merger, the Partnership was merged with and into the Company (the "Merger"), with the Company surviving the Merger. As a result of the Merger, the membership interests in the Company existing immediately prior to the Merger were canceled and the partnership interests in the Partnership existing immediately prior to the Merger were converted into membership interests in the Company. In addition, the Initial LLC Agreement was amended and restated in its entirety as the Amended and Restated Limited Liability Company Agreement, dated as of December 31, 1997. The Merger was effectuated by filing Articles of Merger with the Oklahoma Secretary of State on December 31, 1997. The members and their respective interests at December 31, 2000 are: TGP 1.01% USCOC of Tulsa 48.93% ICTLLC 44.45% NC RSA 4 5.61%
Profits and losses are allocated based on respective membership interests. Distributions are made quarterly at the discretion of the managing member based on respective membership interests. TGP holds a 1.01% membership interest. TGP is a corporation in which USCOC of Tulsa owns 51% and ICTC owns 49%. Both USCOC of Tulsa and NC RSA 4 are 100.0%-owned subsidiaries (indirectly) of USCC. USCC is an 82.4%-owned subsidiary of Telephone and Data Systems, Inc. ("TDS"). (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: a. DEPRECIATION - Depreciation is computed using the straight-line method over the useful lives of the assets, which are estimated to be 3 to 25 years. b. REVENUES - Revenues primarily consist of charges to customers for monthly access, cellular airtime and data usage, roamer revenue (inbound and outbound), equipment sales, long distance charges and vertical services. The Company recognizes service revenues as rendered. Activation and reconnection fees are recognized over average customer service periods. Unbilled revenues, resulting from cellular service provided from the billing cycle date to the end of December and from other cellular carriers' customers using the Company's cellular system for the last half of December, are estimated and recorded. Revenues earned but unbilled at December 31, 2000 were $1,400,417 and are included in accounts receivable. Equipment sales are recognized upon delivery to the customer and reflect charges to customers for cellular telephone user equipment purchased. c. CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash and those short-term, highly liquid investments with original maturities of three months or less. The carrying amount reported in the balance sheet for cash and cash equivalents approximates its fair value. 8 Included in cash and cash equivalents at December 31, 2000 are due-on-demand funds invested in CellVest, Inc., which is a wholly-owned subsidiary of USCC. CellVest is a fund that purchases government and high grade investment securities for the benefit of fund participants. The Company owns a proportionate share of the fund based upon its account balance as a percentage of the total assets in the fund. Interest income earned by the fund, net of direct expenses, is passed through to the Company based upon the Company's average daily balance in the fund. d. ACCOUNTS RECEIVABLE - Accounts receivable consists of amounts owed by customers for both service provided and equipment sales, by affiliated entities, and by other cellular carriers as a result of these carriers' customers using the Company's cellular system. e. INVESTMENT IN LICENSES - Investment in licenses consists of the costs of acquiring Federal Communications Commission licenses. These costs include amounts paid for legal, engineering and consulting services and amounts incurred by the Company in acquiring these interests. NC RSA 4 contributed the OK RSA 4 license valued at $6,450,506 during 1995. License costs are being amortized over 40 years. Amortization expense was $641,254 for the year ended December 31, 2000. f. DEFERRED REVENUES - Deferred revenues primarily represent monthly access fees billed in advance and deferred activation and reconnection fees. Access fee revenues are recognized in the following month when service is provided. Activation and reconnection fee revenues are recognized ratably over customer service periods averaging 48 months and 6 months, respectively. g. PENSION PLAN - Employees, who manage the daily operations of the Company, are eligible for Telephone and Data Systems, Inc. Wireless Companies' Pension Plan (the "Pension Plan"). The Pension Plan is a qualified noncontributory defined contribution pension plan, which began effective January 1, 1994. It provides pension benefits for all employees of USCC and its subsidiaries. Under this plan, pension benefits and costs are calculated separately for each participant and are funded currently. The Company's pension costs were $81,772 for the year ended December 31, 2000. h. INCOME TAXES - No provision has been made for federal and state income taxes as these taxes are the responsibility of the individual members. i. USE OF ESTIMATES - The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, but management believes they will not be material. 9 j. SUPPLEMENTAL CASH FLOW DISCLOSURES The Company paid interest in the amount of $1,829,513 for the year ended December 31, 2000. Net additions to property, plant and equipment during 2000 include net transfers to affiliates of USCC. These assets were transferred in at a net book value of $25,465 and transferred out at a net book value of $31,874 and as such, no gains or losses were recorded. Certain assets were also disposed of for a gain of $10,587 during 2000. The loss is included in other income (expense), net. k. ADVERTISING COSTS - The Company expenses advertising costs as incurred. Advertising costs totaled $4,839,228 for the year ended December 31, 2000. l. LONG - LIVED ASSETS - The management of the Company reviews for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Impairment losses are recognized when the expected future cash flows, undiscounted, are less than the asset's carrying value. m. CHANGE IN ACCOUNTING PRINCIPLE - Effective January 1, 2000 the Company changed its method of accounting for activation and reactivation fees in compliance with Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements," issued by the Securities and Exchange Commission. Under the new accounting method, the Company defers recognition of certain activation and reactivation fees. The cumulative effect of this change for periods prior to January 1, 2000 of $962,572 is shown as the cumulative effect of accounting change in the Statement of Operations. Additionally, as part of the implementation, outbound roaming revenues (revenues from the Company's customers who roam in other markets) previously reported as an offset to system operations expense are now reported as revenues. (3) LEASE COMMITMENTS: The Company leases office locations, cell site locations and retail locations under operating leases. Rent expense totaled $760,250 for the year ended December 31, 2000. Rent expense for the office locations is included in general and administrative expense, rent expense for the cell site locations is included in system operations expense and rent expense for the retail locations is included in marketing and selling expense. Future minimum rental payments required under these operating leases, which have an initial noncancellable lease term of more than one year as of December 31, 2000, are as follows: 2001 $ 406,999 2002 336,837 2003 274,239 2004 248,476 2005 233,611 Thereafter 2,316,469 ------------ Total $ 3,816,631 ============
10 (4) PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment in service and under construction is stated at cost and consist of:
December 31, 2000 -------------- Land and land improvements $ 6,758,170 Leasehold improvements 2,613,468 Buildings and equipment 79,253,343 Furniture and office equipment 1,261,167 Vehicles 319,126 -------------- 90,205,274 Less accumulated depreciation 36,769,480 -------------- Net property, plant and equipment $ 53,435,794 ==============
(5) NOTES PAYABLE - AFFILIATE: The Company has notes payable to USCC of $25,172,150 at December 31, 2000. These notes bear interest of 1.90% over the 90-day Commercial Paper Rate of high-grade, unsecured notes and are due upon demand. The carrying value of the Company's borrowings from USCC approximates its fair value, as the notes payable - affiliate are variable debt with the interest rate based on the Commercial Paper Rate. (6) LONG TERM DEBT - AFFILIATE: Since 1991, USCC entered into agreements with Northern Telecom Finance Corporation ("NTFC") that included a commitment by NTFC to finance equipment purchases made and construction costs incurred by certain entities managed by USCC. Any borrowings made by USCC were loaned to the individual entity which made the purchases and incurred the costs. These borrowings are collateralized by a secured interest in the tangible assets (excluding customer accounts receivable) and intangible assets of the Company (excluding any interest in the Company's Federal Communications Commission license). Effective January 1, 1996, interest accrues at an interest rate of 1.90% over the 90-day Commercial Paper Rate of high-grade, unsecured notes. During 1997, USCC paid off the debt to NTFC, however the Company's debt to USCC remains, with the same collateral requirements and interest rate, except USCC now holds the security interest in the collateral. The carrying value of these borrowings approximates fair value. The fair value of the long-term debt is estimated using a discounted cash flow analysis. Following are maturities of long-term debt for the term of financing: 2001 $ 2,153,667 2002 903,666 2003 711,584 ------------ Total $ 3,768,917 ============
11 (7) CONCENTRATION OF CREDIT RISK: The Company provides cellular service and sells cellular telephones to a diversified group of consumers within a concentrated geographical area. The Company performs credit evaluations of the Company's customers and generally does not require collateral. Receivables are generally due within 30 days. Credit losses related to customers have been within management's expectations. (8) TRANSACTIONS WITH RELATED PARTIES: USCC and certain affiliates of TDS provide the Company with centralized management, accounting, customer service, consulting and computer services which resulted in net billings to the Company of $15,810,109 during 2000. The Company earned roaming revenue of $711,553 and incurred roaming expenses of $1,014,674 from certain affiliates of USCC during 2000. The Company earned net switching revenue of $82,115 from certain affiliates of USCC during 2000. The Company also provided administrative and other services to certain affiliates of USCC which resulted in net billings to those affiliates of $383,597 during 2000. Management believes that all affiliated expenses, costs, and revenues applicable to the Company are representative of what they would have been if the Company operated on a stand-alone basis.