<PAGE> 1
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
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-2755
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
GTE HOURLY SAVINGS PLAN
GTE CORPORATION
1255 CORPORATE DRIVE
IRVING, TEXAS 75038
<PAGE> 2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Administrator of the
GTE Hourly Savings Plan:
We have audited the accompanying statements of net assets
available for plan benefits of the GTE Hourly Savings Plan (the "Plan")
as of December 31, 1999 and 1998, and the related statement of changes
in net assets available for plan benefits for the year ended December
31, 1999. These financial statements are the responsibility of the Plan
Administrator. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. 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 net assets available for
plan benefits of the Plan as of December 31, 1999 and 1998, and the
changes in its net assets available for plan benefits for the year
ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
ARTHUR ANDERSEN LLP
Dallas, Texas
June 19, 2000
<PAGE> 3
GTE HOURLY SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 1999 AND 1998
(thousands of dollars)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
ASSETS:
Investments at fair value $1,951,100 $1,851,493
RECEIVABLES:
Employer contribution receivable 2,165 25,723
Employee contributions receivable -- 3,025
---------- ----------
Net assets available for plan benefits $1,953,265 $1,880,241
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
GTE HOURLY SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1999
(thousands of dollars)
<TABLE>
<S> <C>
Additions:
Additions to net assets attributed to:
Investment income:
Interest and dividends $ 62,745
Net investment gain (Notes 2 & 3) 133,701
----------
196,446
Contributions (Note 5):
Employee 81,298
Employer 27,435
----------
108,733
----------
Total additions 305,179
----------
Deductions:
Deductions from net assets attributed to:
Benefits paid to participants 227,954
Transfer to another plan, net (Note 8) 3,850
Administrative expenses 351
----------
Total deductions 232,155
----------
Net increase 73,024
Net assets available for plan benefits:
Beginning of year 1,880,241
----------
End of year $1,953,265
==========
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE> 5
GTE HOURLY SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(1) Description of the Plan:
Eligibility
The GTE Corporation ("GTE") GTE Hourly Savings Plan (the "Plan") is a
defined contribution plan under the Employee Retirement Income Security Act of
1974. The Plan provides eligible employees of GTE and its subsidiaries
("Participating Affiliates") with a convenient way to save for both medium and
long-term needs.
The Plan is generally available to any eligible employee as defined by
the plan document, of GTE or a Participating Affiliate, who either is in a unit
covered by a collective bargaining agreement that provides for participation in
the Plan, or is a nonunion hourly-paid employee that GTE or a Participating
Affiliate has agreed, by resolution of its board of directors, to co-sponsor
under the Plan. To the extent expressly provided in any written separation
policy of GTE or a Participating Affiliate, eligible employee also includes any
former employee of GTE or a Participating Affiliate who is receiving salary
continuation payments pursuant to the separation policy.
An individual's active participation in the Plan shall terminate when
the individual ceases to be an eligible employee; but, the individual shall
remain a participant until the entire account balance under the Plan has been
distributed or forfeited.
Vesting and Investment Choices
Prior to May 18, 1999, matching contributions vested immediately upon
death, disability, retirement, attainment of age 65 or five years of service
with GTE or a Participating Affiliate. For participants with less than five
years of service, matching contributions vested 50% immediately and 50% 24
months after the contributions were made. Effective May 18, 1999, the vesting
provision for the Plan changed. See Note 9 "GTE merger with Bell Atlantic
Corporation" for details. Forfeitures of a participant's account due to
termination prior to 100% vesting are used to reduce GTE's future contributions.
Participants direct their contributions to be invested in one of the
following current investment options: five Fidelity funds, five Fidelity
strategy portfolios, five other funds and portfolios, the GTE stock portfolio or
in any combination of these funds and portfolios. Participants are permitted to
make changes to their investment choices on a daily basis.
The Savings Plan Committee may, at its sole discretion, eliminate,
and/or change the underlying composition of any of the investment options, and
may add other funds as a current investment option.
Participant Accounts
Each participant's account is credited with the participant's
contribution and allocations of: (1) Company matching contributions; (2)
rollover contributions; and (3) Plan income. Allocations are based on
participant account balances. The benefit to which a participant is entitled is
the benefit that can be provided from the participant's vested account balance.
Participant Loans
A loan feature is available to participants, which permits borrowing up
to 50% of a participant's vested balance, subject to certain limitations. The
primary
<PAGE> 6
GTE HOURLY SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
assets of the Loan Fund are promissory notes executed by participants who have
taken loans.
Interest rates on loans are equal to the prime interest rate on the
first business day of each calendar quarter. Participant loans are withdrawn
proportionately from the participants' investment accounts. When loans are
repaid, the principal and interest are reinvested according to the participants'
current investment choices. Short-term loans are from six months to five years;
long-term loans for the purchase of a primary residence are from five to twenty
years.
Master Trust
The Plan participates in the GTE Master Savings Trust (the "Master
Trust") and, along with the GTE Savings Plan ("Savings Plan"), owns a percentage
of the assets in the Master Trust. These percentages are based on a pro rata
share of the Master Trust assets. At December 31, 1999 and 1998, the Plan owned
approximately 23% of the assets in the Master Trust. Interest and dividends
along with net investment gains or losses are allocated to the Plan on a daily
basis based upon the Plan's participation in the various investment funds and
portfolios that comprise the Master Trust as a percentage of the total
participation in such funds and portfolios (see Note 10).
Trustee
Fidelity Management Trust Company (the "Trustee") has been designated
as the Trustee under the Plan and is responsible for the investment,
reinvestment, control and disbursement of the funds and portfolios of the Plan.
Expenses of administering the Plan and related funds and portfolios, including
fees and expenses of the Trustee, are charged to the participants' accounts pro
rata. GTE Service Corporation, a subsidiary of GTE, is the plan administrator.
Plan Modification
GTE reserves the right to terminate, modify, alter or amend the Plan at
any time, provided that no such change shall permit any of the funds to be used
for any purpose other than the exclusive benefit of the participants. In the
event of termination or discontinuance of the Plan by GTE, participants'
interest in their accounts will become fully vested.
(2) Accounting Policies:
Effective December 31, 1999, GTE adopted Accounting Standards Executive
Committee Statement of Position ("SOP")99-3, "Accounting for and Reporting of
Certain Defined Contribution Plan Investments and other Disclosure Matters".
This SOP eliminated: 1) the requirements for a defined contribution plan to
present plan investments by general type for participant-directed investments in
the statement of net assets available for benefits; 2) the requirement to
disclose participant-directed investment programs; 3) the requirement to
disclose total number of units and the net asset value per unit; and 4) the
requirement to disclose benefit-responsive investment contracts by investment
fund option. Additionally, it now requires a defined contribution plan to
identify nonparticipant-directed investments that represent 5% or more of net
assets.
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which requires management to make
<PAGE> 7
GTE HOURLY SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
estimates and assumptions that affect reported amounts of assets, liabilities,
and changes therein, and disclosure of contingent assets and liabilities. Actual
results could differ from those estimates. Certain reclassifications have been
made to prior-year data to conform to the current year presentation.
Investments are stated at market value determined from publicly stated
price information obtained from the New York Stock Exchange at or near the close
of business. Investments are recorded on the trade date. Guaranteed investment
contracts are stated at cost plus accrued interest or contract value. Net
investment gains and losses include both unrealized gains and losses on
investments held by the Plan at year-end as well as realized gains and losses on
investments sold during the year. Net unrealized and net realized gains and
losses are based on the changes in value of the investments at the beginning of
the Plan year or at the time of purchase if acquired during the Plan year.
Benefits are recorded when paid. Benefits are payable in a lump sum
cash payment unless a participant elects, in writing, one of the three optional
forms of benefit payment which include: (1) a lump sum in GTE shares for
investments in the GTE Stock Portfolio, with the balance in cash; (2) annual,
semiannual, quarterly, or monthly installments in cash of approximately equal
amounts to be paid out for a period of 2 to 20 years, as selected by the
participant; or (3) for those participants eligible to receive their
distribution in installments as described in (2) above, a pro rata portion of
each installment payment in GTE shares for investments in the GTE Stock
Portfolio, with the balance of each installment in cash.
(3) Investments:
The following presents investments that represent 5% or more of the
Plan's net assets (in thousands):
<TABLE>
<CAPTION>
December 31,
1999 1998
----- ----
<S> <C> <C>
GTE Common Stock* $719,213 $719,864
GTE Common Stock 340,066 329,515
Magellan Fund 187,727 143,099
U.S. Equity Index Collective Trust Fund 126,616 112,689
Conservative Strategy Portfolio - 98,988
</TABLE>
--------------
* Nonparticipant-directed
During 1999, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) appreciated in
value by $133.7 million as follows:
<TABLE>
<S> <C>
GTE Common Stock $ 45.2
Mutual Funds 88.5
------
Total $133.7
======
</TABLE>
<PAGE> 8
GTE HOURLY SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
(4) Nonparticipant-Directed Investments:
Information about the net assets and the significant components of the
changes in net assets relating to the nonparticipant-directed investments is as
follows (in thousands):
<TABLE>
<CAPTION>
December 31,
Net assets: 1999 1998
---- ----
<S> <C> <C>
GTE common stock $721,378 $745,587
Loans to participants 82,294 79,412
-------- --------
Total $803,672 $824,999
======== ========
</TABLE>
<TABLE>
<CAPTION>
Year ended
December 31, 1999
-----------------
<S> <C>
Changes in net assets:
Employer contributions $ 27,435
Dividends 18,101
Net investment gain 30,579
Benefits paid to participants (98,371)
Other 929
--------
Total $(21,327)
========
</TABLE>
(5) Contributions:
The Plan is funded by employee contributions up to a maximum of 16% of
compensation and by company matching contributions in shares of GTE common stock
ranging from 50% to 75%, depending on the collective bargaining agreement, of
the initial 6% of the participants' contributions of eligible compensation each
payroll period not withdrawn, or distributed during the Plan year. Prior to May
18, 1999, the company matching contributions were credited following the close
of each calendar year to the accounts of participants who had not terminated
their active participation. Effective May 18, 1999, the company matching
provisions for the Plan changed. See Note 9 "GTE Merger with Bell Atlantic
Corporation" for details. Participant contributions may be before tax ("Elective
Contributions") or from currently taxed compensation ("After-Tax
Contributions").
Each participant's Elective Contributions for the 1999 Plan year was
limited to $10,000. The total amount of Elective Contributions, After-Tax
Contributions and company matching contributions and certain forfeitures that
may be allocated to a Plan participant for the 1999 Plan year was limited to the
lesser of (i) $30,000 or (ii) 25% of the participant's total compensation; and
the compensation on which such GTE contributions were based was limited to
$160,000.
GTE matching contributions are made in GTE common stock and in general,
participants cannot redirect these shares into other investment choices. For the
1999 Plan year, total company matching contributions of 399,054 shares of GTE
common stock were made with a market value at date of contribution of $27.4
million.
<PAGE> 9
GTE HOURLY SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
(6) Related Party Transactions:
Certain Plan investments are shares of mutual funds managed by the
Trustee. Therefore, those transactions qualify as party-in-interest, but they
are subject to an exemption to the party-in-interest rules. Fees paid by the
Plan for investment management services amounted to $351 thousand for the 1999
Plan year.
(7) Tax Status:
The Plan is a qualified profit sharing plan under Sections 401(a),
401(k) and 501 of the Internal Revenue Code of 1986, as amended, ("the Code")
and consequently is exempt from income tax. Management has received a
determination letter dated January 12, 1998, from the Internal Revenue Service
to the effect that the Plan, as amended, qualifies under Sections 401(a),
401(k), and 501 of the Code.
(8) Transfer To Another Plan, Net:
In 1999, net transfers out of the Plan consisted of transfers out of $6
million in assets for participants who became eligible to participate in the
Savings Plan, and rollovers into the Plan of $2.1 million from other qualified
plans.
(9) GTE Merger with Bell Atlantic Corporation:
On July 27, 1998, GTE and Bell Atlantic entered into a merger agreement
providing for a combination of the two companies. Under terms of the agreement,
which was unanimously approved by the boards of directors of both companies, GTE
shareholders will receive 1.22 shares of Bell Atlantic stock for each GTE share
they own. The merger is subject to regulatory approval.
On May 18, 1999, GTE shareholders approved the merger. As a result of
the affirmation, certain protective change in control provisions were triggered
which will remain in effect until July 1, 2000. These provisions include: 1)
past and future company matching contributions become immediately vested as soon
as they are posted to participants' accounts, 2) participants do not have to be
employed on the last day of the Plan year to be eligible for the match, and 3)
company matching contributions will be posted to participants' accounts on a
monthly basis. They will be immediately available for withdrawals, loans, etc.,
in accordance with the Plan provisions. The Plan will continue in its current
form until July 1, 2000, however, company matching contributions after the
merger is completed will be made in shares of the combined company stock.
On or after July 1, 2000, GTE may amend the Plan without regard to the
change in control provisions, subject to applicable law and the Plan terms.
(10) GTE Master Savings Trust:
The plans participating in the Master Trust include the GTE Savings
Plan and the GTE Hourly Savings Plan.
In the Master Trust, funds are invested in guaranteed income contracts,
which represented 78% of the conservative pool consisting of 69 investment
contracts held with 20 insurance companies. Standard & Poor's, as of December
31, 1999 and 1998, rated these insurance companies A+ or better and A or better,
respectively. The contracts are included in the financial statements at contract
value, approximately $724 million and $630 million, which approximates fair
value, as reported by the insurance companies at December 31, 1999 and 1998,
respectively.
<PAGE> 10
GTE HOURLY SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
Contract value represents contributions made under the contract, plus
earnings, less withdrawals and administrative expenses. Investment contracts are
normally set at a fixed rate through maturity, which is also the minimum
crediting interest rate. Limitations on guarantees for normal investment
contracts are dependent on the creditworthiness of the insurance company.
Synthetic investment contracts ("Synthetics") are determined by an internal rate
of return calculation that equates market value and book value at the expected
average life of the securities. The Synthetics interest rate is reset quarterly,
with no minimum-crediting interest rates below zero. Limitations on Synthetics
are dependent upon the credit quality of the underlying securities.
The investment contracts had average yields of 6.99% and 7.14% at
December 31, 1999 and 1998, respectively. The crediting interest rate for the
investment contracts had a range from 5.60% to 7.28% and 5.60% to 8.06% at
December 31, 1999 and 1998, respectively. The investment contracts have
scheduled maturities from January 10, 2000 to November 3, 2003. No valuation
reserve was recorded at December 31, 1999 and 1998, to adjust contract amounts.
The following schedules reflect the Master Trust net investments by
investment type as of December 31, 1999 and 1998, and investment income for the
year ended December 31, 1999 (in thousands):
<TABLE>
<CAPTION>
Investments in Investment Income in Master Trust
Master Trust Year Ended December 31, 1999
------------ ----------------------------
Net
December 31, Interest & Investment
1999 1998 Dividends Gain
---- ---- --------- ----
<S> <C> <C> <C> <C>
GTE Common Stock $4,065,430 $4,128,325 $103,342 $188,562
Mutual Funds 3,898,489 3,564,175 140,273 481,768
Loans to Participants 202,216 208,527 16,006 -
Money Market Fund 209,907 190,236 9,420 -
---------- ---------- -------- --------
Total $8,376,042 $8,091,263 $269,041 $670,330
========== ========== ======== ========
</TABLE>
(11) Subsequent Events:
Effective April 28, 2000, the Plan was amended to allow for a
profit-sharing contribution for certain employees as may be specified by an
amendment to the Plan executed by the Executive Vice President - Human Resources
and Administration.
On June 16, 2000, the Federal Communications Commission approved the
GTE/Bell Atlantic Corporation merger, pursuant to which each share of GTE common
stock will be converted into 1.22 shares of the combined company's stock. Before
merging with Bell Atlantic, GTE will exchange its common stock of Genuity for
shares of a new class of common stock, and Genuity will sell 90.5% of its equity
to public shareholders through an initial public offering. Both the initial
public offering of Genuity stock and the closing of the merger are expected to
be completed at the end of June 2000.
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Savings Plan Committee has duly caused this annual report to be signed by
the undersigned thereunto duly authorized.
GTE HOURLY SAVINGS PLAN
-----------------------
(Name of Plan)
Date June 21, 2000 By Paul R. Shuell
------------------- ------------------------------
(Paul R. Shuell)
Vice President and Controller
<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
23.1 Consent of Arthur Andersen LLP
</TABLE>
