<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 SAVINGS PLAN
GTE CORPORATION
1255 CORPORATE DRIVE
IRVING, TEXAS 75038
<PAGE> 2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Administrator of the
GTE Savings Plan:
We have audited the accompanying statements of net assets available for
plan benefits of the GTE 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 SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 1999
(thousands of dollars)
<TABLE>
<CAPTION>
ESOP Shares ESOP Shares
Other Fund Fund
Investments Allocated Unallocated Total
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS:
Investments at fair value $5,050,940 $ 575,010 $ 798,992 $6,424,942
RECEIVABLES:
Employer contribution receivable -- -- 49,477 49,477
---------- ---------- ---------- ----------
Total assets 5,050,940 575,010 848,469 6,474,419
---------- ---------- ---------- ----------
LIABILITIES:
Interest payable -- -- 49,477 49,477
Notes payable -- -- 453,269 453,269
---------- ---------- ---------- ----------
Total liabilities -- -- 502,746 502,746
---------- ---------- ---------- ----------
Net assets available for plan benefits $5,050,940 $ 575,010 $ 345,723 $5,971,673
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
GTE SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 1998
(thousands of dollars)
<TABLE>
<CAPTION>
ESOP Shares ESOP Shares
Other Fund Fund
Investments Allocated Unallocated Total
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS:
Investments at fair value $4,835,489 $ 526,409 $ 877,872 $6,239,770
RECEIVABLES:
Employer contribution receivable 2,681 -- 46,194 48,875
Employee contributions receivable 7,354 -- -- 7,354
---------- ---------- ---------- ----------
Total receivables 10,035 -- 46,194 56,229
---------- ---------- ---------- ----------
Total assets 4,845,524 526,409 924,066 6,295,999
---------- ---------- ---------- ----------
LIABILITIES:
Notes payable -- -- 554,694 554,694
---------- ---------- ---------- ----------
Net assets available for plan benefits $4,845,524 $ 526,409 $ 369,372 $5,741,305
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
GTE SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1999
(thousands of dollars)
<TABLE>
<CAPTION>
Additions:
ESOP Shares ESOP Shares
Additions to net assets attributed to: Other Fund Fund
Investments Allocated Unallocated Total
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Investment income:
Interest and dividends $ 168,022 $ 15,637 $ 22,637 $ 206,296
Net investment gain (loss) (Notes 2 & 3) 473,651 70,146 (7,168) 536,629
---------- ---------- ---------- ----------
641,673 85,783 15,469 742,925
Contributions (Note 5):
Employee 196,027 -- -- 196,027
Employer 1 -- 55,004 55,005
---------- ---------- ---------- ----------
196,028 -- 55,004 251,032
Transfers from other plans, net (Note 9) 21,326 -- -- 21,326
Transfer between funds 4,603 40,042 (44,645) --
---------- ---------- ---------- ----------
Total additions 863,630 125,825 25,828 1,015,283
---------- ---------- ---------- ----------
Deductions:
Deductions from net assets attributed to:
Benefits paid to participants 657,825 77,224 -- 735,049
Interest expense -- -- 49,477 49,477
Administrative expenses 389 -- -- 389
---------- ---------- ---------- ----------
Total deductions 658,214 77,224 49,477 784,915
---------- ---------- ---------- ----------
Net increase (decrease) 205,416 48,601 (23,649) 230,368
Net assets available for plan benefits:
Beginning of year 4,845,524 526,409 369,372 5,741,305
---------- ---------- ---------- ----------
End of year $5,050,940 $ 575,010 $ 345,723 $5,971,673
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
GTE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(1) Description of the Plan:
Eligibility
The GTE Corporation ("GTE") GTE 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.
Eligible employee generally means an employee of GTE or a Participating
Affiliate as defined by the plan document. 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 end of the Plan year for which the contributions were made.
Effective May 18, 1999, the vesting provision for the Plan changed. See Note 10
"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 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.
<PAGE> 7
GTE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
Master Trust
The Plan participates in the GTE Master Savings Trust (the "Master Trust")
and, along with the GTE Hourly Savings Plan ("Hourly 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 77% 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 11).
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 including the
payment of principal and interest on the Employee Stock Ownership Plan's notes
payable (see Note 6). 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
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.
<PAGE> 8
GTE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
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* $2,374,710 $2,488,695
Magellan Fund 712,884 562,152
GTE Common Stock 631,441 590,251
Moderate Growth Strategy Portfolio 414,566 406,977
U.S. Equity Index Collective Trust Fund 405,633 368,447
Long-Term Growth Strategy Portfolio 357,743 326,904
Equity-Income Fund -- 344,066
Conservative Strategy Portfolio -- 336,120
</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 $536.6 million as follows:
<TABLE>
<S> <C>
GTE Common Stock $143.4
Mutual Funds 393.2
------
Total $536.6
======
</TABLE>
<PAGE> 9
GTE 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 $1,921,441 $1,982,876
Loans to participants 119,924 129,115
---------- ----------
Total $2,041,365 $2,111,991
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Year ended
December 31, 1999
-----------------
<S> <C>
Changes in net assets:
Employer contributions $ 55,005
Dividends 62,516
Net investment gain 109,148
Benefits paid to participants (239,974)
Interest expense (49,477)
Other (7,844)
---------
Total $ (70,626)
=========
</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
equivalent in value to 75% 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 10 "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 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 1,346,863 shares of GTE
common stock were made with a market value at date of contribution of $94.1
million.
(6) Employee Stock Ownership Plan:
An Employee Stock Ownership Plan (the "ESOP") was established within the
Plan. In 1989, the ESOP borrowed $700 million to acquire, at market value, 24.6
million shares of GTE common stock which will be used to meet a substantial
portion of the
<PAGE> 10
GTE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
estimated employer contributions to the Plan through 2004. GTE and the
Participating Affiliates also make annual cash contributions to the ESOP which,
when combined with dividends on the GTE common stock held by the ESOP, are
sufficient to repay the principal and interest on the loans which have 10 and
15-year terms. As the ESOP makes loan payments, a percentage of the GTE common
stock held by the ESOP will be allocated to the participants' accounts in the
form of company matching contributions.
Debt service payments for 1999 totaled $105 million. The principal
component was funded from $39 million of dividends accumulated on the GTE stock
held by the ESOP, $11 million of PAYSOP fund dividends, and $6 million of cash
contributions. The interest component, paid on January 3, 2000, was funded by an
accrued Company contribution of $49 million. At December 31, 1999, 10.7 million
shares of GTE common stock in the ESOP Shares Fund were held as collateral for
the ESOP loans.
The borrowings of the ESOP are as follows (in thousands):
<TABLE>
<CAPTION>
Interest Maturity
Rates Dates 1999 1998
-------- -------- ---- ----
<S> <C> <C> <C> <C>
Series A 9.48% 1999 $ -- $ 46,194
Series B 9.73% 2000-2005 453,269 508,500
-------- --------
$453,269 $554,694
======== ========
</TABLE>
Maturities of the outstanding loans are as follows (in thousands):
<TABLE>
<CAPTION>
Maturity 1999
Date Amount
-------- ------
<S> <C>
2000 $ --
2001 65,316
2002 76,596
2003 89,194
2004 103,249
Thereafter 118,914
--------
Total $453,269
========
</TABLE>
GTE has guaranteed all principal and interest payments on the ESOP
borrowings in the event of default by the Plan.
(7) 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 the
investment management services amounted to $389 thousand for the 1999 Plan year.
(8) 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 April 29, 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.
<PAGE> 11
GTE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
(9) Transfers From Other Plans, Net:
In 1999, transfers into the Plan consisted of approximately $15 million
rolled into the Plan from other qualified plans, and $6 million of assets of
participants in the Hourly Plan who became eligible to participate in the Plan.
(10) 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 approvals.
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 January 1, 2001. 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. However, they will not be available for withdrawals, loans, etc.,
until early the following year, since funding does not occur until the ESOP loan
payment is made at year-end, or shortly thereafter. The Plan will essentially
continue in its current form until January 1, 2001, however, company matching
contributions after the merger is completed will be made in shares of the
combined company stock.
On or after January 1, 2001, GTE may amend the Plan without regard to the
change in control provisions, subject to applicable law and the Plan terms.
(11) 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.
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 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.
<PAGE> 12
GTE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
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>
(12) Subsequent Events:
Effective April 28, 2000, the Plan was amended to allow for a
profit-sharing contribution for certain employees expected to transfer to GTE
affiliates who are participants in a subsidiary 401K/Profit Sharing Plan, namely
the BBN Corporation Retirement Trust Agreement (1998 revision). Once transferred
to a GTE affiliate, they will immediately become eligible to participate in the
Plan. The value of each profit-sharing contribution that is allocated to a
profit-sharing participant's account will be subject to the following terms and
conditions: 1) the value of the profit-sharing contribution will be separately
accounted for as part of the profit-sharing participant's members account; 2)
the value of the profit-sharing contribution will be 50% vested upon the
completion of one year of vesting service, and fully vested after two years of
vesting service; 3) the value of the profit-sharing contribution will not be
distributable before the profit-sharing participant ceases to be an employee; 4)
the profit-sharing participant may direct profit-sharing contributions among any
of the other Plan funds (excluding the GTE Stock Portfolio); and 5) a plan loan
may be made from and secured by the portion of a participant's account
attributable to profit-sharing contributions provided that a plan loan may not
be made from or secured by the portion of a participant's account attributable
to profit-sharing contributions before all other amounts in the participant's
account available for such purposes have been exhausted.
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> 13
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 SAVINGS PLAN
----------------
(Name of Plan)
Date June 21, 2000 By Paul R. Shuell
--------------------- -----------------------------
(Paul R. Shuell)
Vice President and Controller
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
23.1 Consent of Arthur Andersen LLP
</TABLE>
