<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------------
FORM 10-K/A
X AMENDMENT NO. 1 TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to _____________
Commission File No. 2-39373
-----------------------------------------
Lincoln Telephone and Telegraph Company
(Exact name of registrant as specified in its charter)
Delaware 47-0223220
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1440 M Street, Lincoln, Nebraska 68508
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 402-474-2211
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: 5% Preferred Stock,
($100.00 par value)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the Registrant's voting stock held by non-
affiliates, based upon the closing price of such stock as of February 28,
1995, was $0.
Number of shares of common stock outstanding
on
February 28, 1995 -- 1,000
<PAGE>
The undersigned Registrant hereby amends its Annual Report on Form 10-K for
the fiscal year ended December 31, 1994 to include, in their entireties, the
following Report of Independent Public Accountants and accompanying
financial statements and the text of Exhibit 3.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
<PAGE>
THE LINCOLN TELEPHONE AND
TELEGRAPH COMPANY
Financial Statements
December 31, 1994, 1993 and 1992
(With Independent Auditors' Report Thereon)
<PAGE>
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
The Lincoln Telephone and Telegraph Company:
We have audited the accompanying balance sheets of The Lincoln Telephone
and Telegraph Company (Lincoln Telephone) as of December 31, 1994 and 1993,
and the related statements of earnings, stockholder's equity and cash flows
for each of the years in the three-year period ended December 31, 1994.
These financial statements are the responsibility of Lincoln Telephone'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 Telephone at
December 31, 1994 and 1993 and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31,
1994, in conformity with generally accepted accounting principles.
As discussed in notes 7 and 9 to the financial statements, Lincoln
Telephone adopted Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes, and
Statement of Financial Accounting Standards No. 106, Employers' Accounting
for Postretirement Benefits Other Than Pensions, in 1993.
February 3, 1995
<PAGE>
<TABLE>
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
Balance Sheets
December 31, 1994 and 1993
<CAPTION>
Assets 1994 1993
(Dollars in thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 17,270 11,646
Temporary investments, at cost (note 3) 20,118 24,272
Receivables, less allowance for doubtful receivables
of $192,000 in 1994 and $94,000 in 1993 22,872 20,694
Materials, supplies and other assets 4,987 4,723
Due from affiliated company 22 121
------- -------
Total current assets 65,269 61,456
------- ------
Property and equipment (note 2) 456,295 447,689
Less accumulated depreciation and amortization 215,758 202,299
------- -------
Net property and equipment 240,537 245,390
------- -------
Investments and other assets 3,517 1,976
------- -------
Deferred charges (note 7) 18,429 19,654
------- -------
$ 327,752 328,476
======= =======
Liabilities and Stockholder's Equity
Current liabilities:
Note payable to bank (note 6) $ 17,000 30,000
Accounts payable and accrued expenses 25,828 19,606
Income taxes payable 1,331 2,076
Dividends payable 5,556 5,056
Advance billings and customer deposits 6,197 6,058
------- -------
Total current liabilities 55,912 62,796
------- -------
Deferred credits:
Unamortized investment tax credits 3,832 4,892
Deferred income taxes (note 7) 19,568 21,554
Other (notes 7 and 9) 60,881 59,619
------- -------
Total deferred credits 84,281 86,065
------- -------
Long-term debt (notes 2 and 6) 44,000 44,000
------- -------
Preferred stock, 5% redeemable (note 4) 4,499 4,499
------- -------
Stockholder's equity 139,060 131,116
------- -------
$ 327,752 328,476
======= =======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
Statements of Earnings
Years ended December 31, 1994, 1993 and 1992
<CAPTION>
1994 1993 1992
(Dollars in thousands)
<S> <C> <C> <C>
Operating revenues:
Local network services $ 77,617 70,833 66,022
Access services (note 12) 50,570 47,531 44,458
Long distance services 14,679 15,244 16,033
Directory advertising, billing and other
services (note 12) 16,972 16,355 16,229
Other operating revenues 14,856 13,951 14,018
------- ------- -------
Total operating revenues 174,694 163,914 156,760
------- ------- -------
Operating expenses:
Depreciation 31,513 28,208 29,345
Additional non-recurring depreciation on
cellular equipment (note 2) 3,761 - -
Other operating expenses 82,819 80,155 74,545
Taxes, other than payroll and income (note 13) 3,125 2,937 4,313
------- ------- -------
Total operating expenses 121,218 111,300 108,203
------- ------- -------
Operating income 53,476 52,614 48,557
------- ------- -------
Non-operating income and expense:
Income from interest and other investments 1,833 1,411 1,225
Interest expense and other deductions 6,204 8,084 8,674
------- ------- -------
Net non-operating expense 4,371 6,673 7,449
------- ------- -------
Income before income taxes and
cumulative effect of change in
accounting principle 49,105 45,941 41,108
Income taxes (notes 7 and 13) 18,936 17,239 14,389
------- ------- -------
Income before cumulative effect of
change in accounting principle 30,169 28,702 26,719
Cumulative effect of change in accounting
principle (note 9) - 22,999 -
------- ------- -------
Net income 30,169 5,703 26,719
Preferred dividends 225 225 338
------- ------- -------
Earnings available for common shares $ 29,944 5,478 26,381
======= ======= =======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
Statements of Stockholder's Equity
Years ended December 31, 1994, 1993 and 1992
<CAPTION>
1994 1993 1992
(Dollars in thousands)
<S> <C> <C> <C>
Stockholder's equity (note 10):
Common stock of $3.125 par value per share.
Authorized 10,000 shares; issued 1,000 shares $ 3 3 3
------- ------- -------
Premium on common stock 32,492 32,492 32,492
------- ------- -------
Retained earnings (note 6):
Beginning of year 98,621 112,143 101,837
Net income 30,169 5,703 26,719
Premium on redemption of preferred stock - - (75)
Dividends declared:
5% cumulative preferred - $5.00 per share (225) (225) (225)
7.64% cumulative preferred - $7.64 per share - - (113)
Common - $22,000 per share in 1994, $19,000
per share in 1993 and $16,000 per share
in 1992 (22,000) (19,000) (16,000)
------- ------- -------
End of year 106,565 98,621 112,143
------- ------- -------
Total stockholder's equity $ 139,060 131,116 144,638
======= ======= =======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
Statements of Cash Flows
Years ended December 31, 1994, 1993 and 1992
<CAPTION>
1994 1993 1992
(Dollars in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 30,169 5,703 26,719
------ ------ ------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 35,305 28,306 29,413
Cumulative effect of change in accounting - 22,999 -
principle
Deferred income taxes (1,986) (14,312) 2,277
Changes in assets and liabilities:
Receivables (2,178) (1,035) (1,893)
Materials, supplies and other assets 1,033 (11,018) (1,952)
Accounts payable and accrued expenses 6,222 (1,706) 6,378
Other liabilities (404) 28,745 (528)
------ ------ ------
Total adjustments 37,992 51,979 33,695
------ ------ ------
Net cash provided by operating
activities 68,161 57,682 60,414
------ ------ ------
Cash flows used for investing activities:
Expenditures for property and equipment (31,393) (24,491) (27,034)
Net salvage on retirements 972 (57) 1,564
------ ------ ------
Net capital additions (30,421) (24,548) (25,470)
Purchases and sales of investments and other
assets, net (1,545) (687) (945)
Purchases of temporary investments (16,510) (33,242) (47,065)
Maturities and sales of temporary investments 20,664 27,735 43,850
------ ------ ------
Net cash used for investing
activities (27,812) (30,742) (29,630)
------ ------ ------
Cash flows used for financing activities:
Dividends to stockholders (21,725) (18,225) (16,395)
Proceeds from issuance of note payable to bank 1,000 35,000 -
Payments on note payable to bank (14,000) (5,000) -
Principal payments on long-term debt and
redemption of preferred stock - (34,875) (9,810)
------ ------ ------
Net cash used in financing activities (34,725) (23,100) (26,205)
------ ------ ------
Net increase in cash and cash equivalents 5,624 3,840 4,579
Cash and cash equivalents, beginning of year 11,646 7,806 3,227
------ ------ ------
Cash and cash equivalents, end of year $ 17,270 11,646 7,806
====== ====== ======
(Continued)
<PAGE>
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
Statement of Cash Flows (Continued)
Years ended December 31, 1994, 1993 and 1992
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 5,459 7,043 8,064
====== ====== ======
Income taxes $ 22,704 18,225 15,372
====== ====== ======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
Notes to Financial Statements
December 31, 1994, 1993 and 1992
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
The Lincoln Telephone and Telegraph Company (Lincoln Telephone) is a
corporation of which all of the outstanding common stock is owned by
Lincoln Telecommunications Company (LTEC). Lincoln Telephone provides
local and long-distance telephone service in 22 southeastern counties of
Nebraska and cellular telecommunication service in the Lincoln, Nebraska
Metropolitan Service Area. Lincoln Telephone maintains its records in
accordance with the rules and regulations of the Nebraska Public Service
Commission (NPSC) which substantially adheres to rules and regulations of
the Federal Communications Commission (FCC).
Lincoln Telephone follows accounting for regulated enterprises prescribed
by Statement of Financial Accounting Standard (FAS) No. 71, Accounting
for the Effects of Certain Types of Regulation. The effect of FAS No. 71
results in regulatory assets of approximately $13,268,000 and $15,182,000
at December 31, 1994 and 1993 and regulatory liabilities of approximately
$10,846,000 and $12,737,000 at December 31, 1994 and 1993, respectively.
Property and Equipment
Property and equipment is stated at cost. Replacements and renewals of
items considered to be units of property are charged to the property and
equipment accounts. Maintenance and repairs of units of property and
replacements and renewals of items determined to be less than units of
property are charged to expense. Property and equipment retired or
otherwise disposed of in the ordinary course of business, together with
the cost of removal, less salvage, is charged to accumulated
depreciation. Lincoln Telephone capitalizes estimated costs, during
periods of construction of more than one year, of debt and equity funds
used for construction purposes. No significant cost was capitalized
during the years ended December 31, 1994, 1993 and 1992. Depreciation on
property and equipment is determined by using the straight-line method
based on estimated service lives.
Income Taxes
Lincoln Telephone files a consolidated income tax return with LTEC and
LTEC's other subsidiaries. Lincoln Telephone's share of the consolidated
tax liability is determined by computing the Lincoln Telephone's
liability as if a separate return had been filed.
Deferred income taxes arise primarily from reporting differences for book
and tax purposes related to depreciation and postretirement benefits.
Investment tax credits on regulated property and equipment were deferred
and taken into income over the estimated useful lives of such property
and equipment.
(Continued)
<PAGE>
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
Notes to Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Retirement Benefits
Lincoln Telephone has a qualified defined benefit pension plan which
covers substantially all employees. Lincoln Telephone also has a
qualified defined contribution profit-sharing plan which covers non-
union-eligible employees. Costs of the pension and profit-sharing plans
are funded as accrued.
Local Network Services
Local service rates are filed with and, in certain circumstances, are
subject to review and approval by the NPSC. Billings for local network
service are rendered monthly in advance on a cyclical basis. Advance
billings are recorded as a liability and subsequently taken into income
in the appropriate periods.
Long Distance and Access Services
Long distance and access services revenues are derived from long distance
calls within Lincoln Telephone's service territory, carrier charges for
access to its local exchange network, subscriber line charges and
contractual arrangements with carriers for other services. Certain of
these revenues are realized under pooling arrangements with other
telephone companies and are divided among the companies based on
respective costs and investments to provide the services. Revenues
realized through the various pooling processes are initially based on
estimates. Adjustments are recorded in subsequent years as participating
companies finalize their respective costs and investments. Lincoln
Telephone elected to be subject to price cap regulation by the FCC
effective July 2, 1993, pursuant to which limits are imposed on Lincoln
Telephone's interstate service rates. Prior to July 2, 1993, Lincoln
Telephone operated under rate-of-return regulation, which offered less
pricing and earnings flexibility than under price cap regulation.
Statements of Cash Flows
For purposes of the statements of cash flows, Lincoln Telephone considers
all temporary investments with an original maturity of three months or
less when purchased to be cash equivalents. Cash equivalents of
$16,012,000 and $9,104,000 at December 31, 1994 and 1993, respectively,
consist of short-term fixed income securities.
(2) Property and Equipment
The table on the following page summarizes the property and equipment
used in the operations.
(Continued)
<PAGE>
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
Notes to Financial Statements
(2) PROPERTY AND EQUIPMENT, CONTINUED
1994 1993
Accumulated Accumulated
depreciation depreciation
and and
Classification Cost amortization Cost amortization
(Dollars in thousands)
Land $ 2,772 - 2,772 -
Buildings 26,159 10,899 25,716 10,334
Equipment 410,665 200,706 407,477 187,953
Motor vehicles and
other work equipment 10,679 4,153 10,116 4,012
------- ------- ------- -------
Total in service 450,275 215,758 446,081 202,299
Under construction 6,020 - 1,608 -
------- ------- ------- -------
$ 456,295 215,758 447,689 202,299
======= ======= ======= =======
Included in property and equipment are investments of $12,106,000 and
$10,986,000 in 1994 and 1993, respectively, that are directly assigned to
non-regulated operations. The corresponding accumulated depreciation and
amortization was $6,995,000 in 1994 and $6,247,000 in 1993. In addition,
other investments that are common to both regulated and non-regulated
operations are allocated in a manner consistent with the FCC's rules and
regulations.
The composite depreciation rate for property was 7.1% in 1994, 6.5% in
1993 and 6.9% in 1992. The rate does not include the additional non-
recurring depreciation recognized in 1994.
Construction expenditures for 1995 are expected to approximate
$42,185,000. Lincoln Telephone anticipates funding construction through
operations.
Due to changes in technology, customer growth, and usage demand for
cellular services in their respective markets, Lincoln Telephone has
entered into an agreement to purchase digital cellular telephone systems
to replace certain existing analog systems serving these markets. These
digital systems are expected to increase capacity and performance in
these markets. The new system is expected to be operational in mid-1995.
The implementation of these system upgrades will cause the early
retirement of certain existing analog equipment prior to the expiration
of its anticipated useful life. As a result, in the first quarter 1994,
Lincoln Telephone wrote down the value of these assets by approximately
$3,398,000. During the fourth quarter 1994, Lincoln Telephone recognized
an additional charge of approximately $363,000 after evaluating updated
information related to this analog equipment. The aggregate after-tax
impact of these nonrecurring non-cash charges to earnings was $2,267,000.
Substantially all property and equipment, with the exception of motor
(Continued)
<PAGE>
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
Notes to Financial Statements
(2) PROPERTY AND EQUIPMENT, CONTINUED
vehicles, is mortgaged or pledged to secure the first mortgage bonds.
Under certain circumstances, as defined in the bond indenture, all assets
become subject to the lien of the indenture.
(3) TEMPORARY INVESTMENTS
Effective December 31, 1994, Lincoln Telephone adopted FAS No. 115,
Accounting for Certain Investments in Debt and Equity Securities. Lincoln
Telephone will apply the provisions of this accounting standard
prospectively.
FAS No. 115 requires fair value reporting for certain investments in debt
and equity securities. Pursuant to FAS No. 115, Lincoln Telephone has
classified all of its investments as "available for sale" at December 31,
1994. This information is summarized below:
Estimated
Amortized Gross unrealized market
cost Gains Losses value
(Dollars in thousands)
Equity securities $ 1,505 - (89) 1,416
U. S. Government obligations 505 - (66) 439
U. S. Government agency
obligations 8,346 42 (131) 8,257
Corporate debt securities 9,762 4 (454) 9,312
------ -- --- ------
$ 20,118 46 (740) 19,424
====== == === ======
The net unrealized loss on investments available for sale is not reported
separately as a component of stockholder's equity due to its
insignificance to the balance sheet at December 31, 1994.
The amortized cost and estimated market value of debt securities at
December 31, 1994, by contractual maturity, are shown below. Expected
maturities will differ from the contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.
Estimated
Amortized market
cost value
(Dollars in thousands)
Due after three months through
five years $ 16,094 15,810
Due after five years through ten
years 2,519 2,198
------ ------
$ 18,613 18,008
====== ======
(Continued)
<PAGE>
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
Notes to Financial Statements
(3) TEMPORARY INVESTMENTS, CONTINUED
The gross realized gains and losses on the sale of securities were
insignificant to the financial statements for the year ended December 31,
1994. Lincoln Telephone does not invest in securities classified as held
to maturity or trading securities.
(4) REDEEMABLE PREFERRED STOCK
Lincoln Telephone has 5% preferred stock with $100 par value per share.
The preferred stock is cumulative, non-voting, non-convertible and
redeemable solely at Lincoln Telephone's option at $105 per share, for a
liquidating amount of $4,724,000, plus accrued dividends. There were
44,991 shares outstanding for each of the years ended December 31, 1994,
1993 and 1992.
In addition, Lincoln Telephone had 7.64% preferred stock. The preferred
stock required an annual sinking fund payment to redeem 2,400 shares
annually with an additional 2,400 shares subject to redemption at par
value. In June 1992, the Board of Directors authorized the redemption of
all outstanding shares of the 7.64% preferred stock. This consisted of
4,800 shares at par value and 24,800 shares at $103 per share. The
redemption was completed on July 10, 1992 with a total payment of
$3,034,400.
(5) DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
Lincoln Telephone's parent, LTEC, has an employee and stockholder
dividend reinvestment and stock purchase plan (Plan) which is available
to Lincoln Telephone's employees.
Stock for the Plan is purchased on the open market by the Plan's
administrator. The basis for the purchase price of the stock allocated
to the Plan participants is the average price paid by the administrator
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.
Expenses incurred related to the Plan were approximately $30,700, $24,000
and $22,000 in 1994, 1993 and 1992, respectively.
(6) LONG-TERM DEBT AND NOTE PAYABLE
Long-term debt at December 31, 1994 and 1993 consists of 9.91% First
Mortgage Bonds of $44,000,000. The First Mortgage Bonds are due June 1,
2000 with interest payable semi-annually.
(Continued)
<PAGE>
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
Notes to Financial Statements
(6) LONG-TERM DEBT AND NOTE PAYABLE, CONTINUED
The long-term debt agreements contain various restrictions including
those relating to payment of dividends by Lincoln Telephone to its
stockholder (LTEC). The note payable to a bank also contains various
restrictions. At December 31, 1994, approximately $34,861,000 of
retained earnings were available for the payment of cash dividends under
the most restrictive provisions of such agreements.
Lincoln Telephone has a note payable to a bank with an interest rate of
6.425% at December 31, 1994 that is due in February 1995. The weighted-
average interest rate on the note payable was 4.6% and 3.5% for the years
ended December 31, 1994 and 1993, respectively.
(7) INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued FAS No.
109, Accounting for Income Taxes. FAS No. 109 required a change in the
method of accounting for deferred income taxes. Under the asset and
liability method of FAS No. 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under FAS No. 109, the effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the accounting period in which the enactment date
occurs.
Generally accepted accounting principles for regulated enterprises
adopting FAS No. 109 required the recognition of deferred tax assets and
liabilities. Lincoln Telephone recognized deferred regulatory assets and
liabilities of approximately $17,096,000 and $14,743,000, respectively,
as a result of adopting FAS No. 109. The net effect of these deferred
regulatory assets and liabilities of approximately $2,353,000 was
recorded on the financial statements as of January 1, 1993 as an increase
to deferred income tax liabilities and is being amortized into income tax
expense on the financial statements over a ten-year period.
Shown below are the components of income taxes from operations before the
cumulative effect of change in accounting principle.
1994 1993 1992
(Dollars in thousands)
Current:
Federal $ 17,953 14,546 11,628
State 4,006 3,217 2,037
------ ------ ------
21,959 17,763 13,665
------ ------ ------
Investment tax credits (1,060) (1,360) (1,553)
------ ------ ------
(Continued)
<PAGE>
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
Notes to Financial Statements
(7) INCOME TAXES, CONTINUED
Deferred:
Federal (1,908) 392 1,843
State (55) 444 434
------ ------ ------
(1,963) 836 2,277
------ ------ ------
Total income tax expense $ 18,936 17,239 14,389
====== ====== ======
Total income tax expense attributable to income from operations in each
year was greater than that computed by applying U.S. Federal income tax
rates to income before income taxes. The reasons for the differences are
shown on the following page.
<TABLE>
<CAPTION>
1994 1993 1992
% of % of % of
pretax pretax pretax
Amount income Amount income Amount Income
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Computed "expected" tax
expense $ 17,187 35.0% $ 16,079 35.0% $ 13,977 34.0%
State income tax expense, net
of Federal income tax
benefit 2,568 5.2 2,380 5.2 1,630 4.0
Tax effect of items capitalized
for financial statement pur-
poses, but expensed for tax
purposes on which deferred
income taxes were not
provided - - - - 390 1.0
Nontaxable interest income (104) (.2) (58) (.1) (21) (.1)
Amortization of regulatory
deferred charge 1,914 3.9 1,914 4.2 - -
Amortization of regulatory
deferred liabilities (1,891) (3.9) (2,006) (4.4) - -
Amortization of investment tax
credits (1,060) (2.1) (1,360) (3.0) (1,553) (3.8)
Other 322 .6 290 .6 (34) (.1)
------ ---- ------ ---- ------ ----
Actual income tax expense $ 18,936 38.5% $ 17,239 37.5% $ 14,389 35.0%
====== ==== ====== ==== ====== ====
</TABLE>
<PAGE>
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
Notes to Financial Statements
(7) INCOME TAXES, CONTINUED
The significant components of deferred income tax expense attributable to
income from operations for the year ended December 31, 1994 and 1993 were
as follows:
1994 1993
(Dollars in thousands)
Deferred tax expense (exclusive of the
effects of amortization below) $ (1,986) 928
Amortization of regulatory deferred charges 1,914 1,914
Amortization of regulatory deferred
liabilities (1,891) (2,006)
----- -----
$ (1,963) 836
===== =====
For the year ended December 31, 1992, deferred tax expense was provided
on certain timing differences in the recognition of revenue and expense
for tax and financial statement purposes. The sources of these
differences and the tax effect of each are shown below (dollars in
thousands):
Tax over financial statement depreciation $ 855
Other taxes 1,200
Other 222
-----
$ 2,277
=====
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1994 and 1993 are presented below:
1994 1993
(Dollars in thousands)
Deferred tax assets:
Accumulated postretirement benefit cost $ 16,739 15,946
Regulatory deferred liabilities 4,857 5,884
Other 2,214 2,276
------ ------
Total gross deferred tax assets 23,810 24,106
Less valuation allowance - -
------ ------
Net deferred tax assets 23,810 24,106
------ ------
Deferred tax liabilities:
Plant and equipment, principally due to
depreciation differences 38,577 40,748
Regulatory deferred charges 3,527 4,036
Other 1,274 876
------ ------
(Continued)
<PAGE>
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
Notes to Financial Statements
(7) INCOME TAXES, CONTINUED
Total gross deferred tax liabilities 43,378 45,660
------ ------
Net deferred tax liability $ 19,568 21,554
====== ======
As a result of the nature and amount of the temporary differences which
give rise to the gross deferred tax liabilities and Lincoln Telephone's
expected taxable income in future years, no valuation allowance for
deferred tax assets as of December 31, 1994 and 1993 was necessary.
(8) BENEFIT PLANS
Lincoln Telephone has a defined benefit pension plan covering
substantially all employees with at least one year of service. Other
companies affiliated with Lincoln Telephone through common ownership also
participate in the plan. Annual contributions to the plan are designed
to fund current and past service costs as determined by independent
actuarial evaluations. There is no prior service liability associated
with the basic benefits provided by the plan.
The net periodic pension credit for all affiliated companies amounted to
$1,570,000, $690,000 and $971,000 in 1994, 1993 and 1992, respectively.
The net periodic pension credit is comprised as shown below. The
components of pension costs for individual affiliates are not available.
1994 1993 1992
(Dollars in thousands)
Service cost - benefits earned during
the period $ 3,479 3,408 3,160
Interest cost on projected benefit
obligations 8,797 8,441 7,744
Actual return on plan assets 1,529 (25,849) (9,309)
Amortization and deferrals, net (15,375) 13,310 (2,566)
------ ------ -----
Net periodic pension credit $ (1,570) (690) (971)
====== ====== =====
The table below summarizes the funded status of the pension plan at
December 31, 1994 and 1993.
1994 1993
(Dollars in thousands)
Actuarial present value of benefit
pension obligation:
Vested $ 100,817 97,040
Nonvested 15,097 14,108
------- -------
Accumulated benefit pension
obligation $ 115,914 111,148
======= =======
Projected benefit pension obligation $ 133,108 127,884
Less, plan assets at market value 177,196 185,197
------- -------
(Continued)
<PAGE>
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
Notes to Financial Statements
(8) BENEFIT PLANS, CONTINUED
Excess of plan assets over
projected benefit pension
obligation 44,088 57,313
Unrecognized prior service cost 4,888 5,924
Unrecognized net gain (34,689) (49,088)
Unrecognized net asset being recognized
over 15.74 years (11,088) (12,520)
------- -------
Prepaid pension cost recognized
in the balance sheets $ 3,199 1,629
======= =======
The assets of the pension plan are invested primarily in marketable
equity and fixed income securities and U.S. Government obligations.
The assumptions used in determining the funded status information and
pension expense were as follows:
1994 and 1993 1992
Discount rate 7.10% 7.10%
Rate of salary progression 6.00 6.25
Expected long-term rate of return
on assets 8.00 8.00
In addition to the defined benefit pension plan, LTEC has a defined
contribution profit-sharing plan which covers any non-union-eligible
employees who have completed one year of service. Participants may elect
to deposit a maximum of 15% of their wages up to certain limits. Lincoln
Telephone matches 25% of the participant's contributions up to 5% of
their wages. The profit-sharing plan also has a provision for an
employee stock ownership fund, to which Lincoln Telephone has contributed
an additional 1.75% of each eligible participant's wage. Lincoln
Telephone's matching contributions and employee stock ownership fund
contributions are used to acquire common stock of LTEC. Lincoln
Telephone's combined contributions totaled $550,100, $521,700 and
$491,300 for 1994, 1993 and 1992, respectively.
(9) POSTRETIREMENT BENEFITS
Lincoln Telephone sponsors a health care plan that provides
postretirement medical benefits and other benefits to employees who meet
minimum age and service requirements upon retirement. Currently,
substantially all of Lincoln Telephone's employees may become eligible
for those benefits if they have 15 years of service with normal or early
retirement. The cost of retiree health care, dental and life insurance
benefits was recognized as an expense as premiums were paid in 1992. For
1992, such expense totaled $2,290,000.
(Continued)
<PAGE>
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
Notes to Financial Statements
(9) POSTRETIREMENT BENEFITS, CONTINUED
Lincoln Telephone adopted FAS No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions, as of January 1, 1993. The
new standard requires accounting for these benefits during the active
employment of the participants. Lincoln Telephone elected to record the
accumulated benefit obligation upon adoption. After taxes, this one-time
charge amounted to $22,999,000, net of income tax benefit of $15,148,000.
Pursuant to FAS No. 71, a regulatory asset associated with the
recognition of the transition obligation was not recorded because of
uncertainties as to the timing and extent of recovery given Lincoln
Telephone's assessment of its long-term competitive environment.
The following table presents the plan's status reconciled with amounts
recognized in Lincoln Telephone's balance sheet at December 31, 1994 and
1993:
1994 1993
(Dollars in thousands)
Accumulated postretirement benefit
obligation:
Retirees $ 30,872 29,851
Fully eligible active plan participants 11,508 9,663
Other active plan participants 7,276 6,990
------ ------
49,656 46,504
Plan assets at fair value - -
Unrecognized prior service cost (164) -
Unrecognized net loss (7,969) (6,864)
------ ------
Accrued postretirement benefit cost
recognized in balance sheets $ 41,523 39,640
====== ======
Net periodic postretirement benefit costs for the years ended December
31, 1994 and 1993 include the following components:
1994 1993
(Dollars in thousands)
Service cost $ 400 284
Interest cost 3,625 3,574
Net deferral and amortization 158 -
Net periodic postretirement benefit costs $ 4,183 3,858
===== =====
For purposes of measuring the benefit obligation, the following
assumptions were used:
1994 and 1993
Discount rate 8.0%
Health care cost trend rate 11.7
This health care cost rate of increase was assumed to decrease gradually
to 5.5% by the year 2004.
(Continued)
<PAGE>
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
Notes to Financial Statements
(9) POSTRETIREMENT BENEFITS, CONTINUED
For purposes of measuring the benefit cost, the following assumptions
were used:
1994 1993
Discount rate 8.0% 9.5%
Health care cost trend rate 11.7 12.0
This health care cost rate of increase was assumed to decrease gradually
to 5.5% by the year 2004. The health care cost trend rate assumptions
have a significant effect on the amounts reported. For example, a one
percentage point increase in the assumed health care cost trend rate
would increase the aggregate service and interest cost by approximately
$360,000 and increase the accumulated postretirement benefit obligation
by approximately $4,400,000.
(10) STOCK AND INCENTIVE PLAN
LTEC has adopted a stock and incentive plan which provides for the award
of short-term incentives (payable in cash or restricted stock), stock
options, stock appreciation rights or restricted stock to certain
officers and key employees of Lincoln Telephone and its affiliates
conditioned upon LTEC and its subsidiaries attaining certain performance
goals.
Under the plan, options may be granted for a term not to exceed ten years
from date of grant. The option price is the fair market value of the
shares on the date of grant. Such exercise price was $11.50 for the 1990
options and $12.75 for the 1992 options. The exercise price of a stock
option may be paid in cash, shares of LTEC common stock or a combination
of cash and shares.
Stock option activity under the plan is summarized as follows:
1994 1993 1992
Outstanding at January 1 110,650 176,000 88,000
Granted - - 88,000
Exercised (10,500) (65,350) -
Canceled - - -
------- ------- -------
Outstanding at December 31 100,150 110,650 176,000
======= ======= =======
Exercisable at December 31 32,150 42,650 -
======= ======= =======
LTEC paid a 100% stock dividend to stockholders of record on December 27,
1993. Per share information pertaining to LTEC has been retroactively
adjusted to give effect to the stock dividend.
The plan also provides for the granting of stock appreciation rights
(SARs) to holders of options, in lieu of stock options, upon lapse of
stock options or independent of stock options. Such rights offer
(Continued)
<PAGE>
THE LINCOLN TELEPHONE AND TELEGRAPHY COMPANY
Notes to Financial Statements
(10) STOCK AND INCENTIVE PLAN, CONTINUED
optionees the alternative of electing not to exercise the related stock
option, but to receive instead an amount in cash, stock or a combination
of cash and stock equivalent to the difference between the option price
and the fair market value of shares of LTEC stock on the date the SAR is
exercised. No SARs have been issued under the plan.
In addition, 11,323 shares, 16,002 shares and 15,224 shares of restricted
stock were awarded from stock purchased on the open market by LTEC during
1994, 1993 and 1992, respectively. Recipients of the restricted stock
are entitled to cash dividends and to vote their respective shares.
Restrictions limit the sale or transfer of the shares for two years
subsequent to issuance unless employment is terminated earlier due to
death, disability or retirement.
Amounts charged against 1994, 1993 and 1992 net earnings for cash and
restricted stock awards were $297,000, $374,000 and $338,000,
respectively. Pursuant to the plan, 2,000,000 shares of LTEC common
stock are reserved for issuance under this plan.
(11) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
First Second Third Fourth
1994 quarter quarter quarter quarter Total
(Dollars in thousand)
Operating revenues $ 42,772 43,195 44,295 44,432 174,694
======= ======= ======= ======= =======
Net income $ 5,273 7,883 8,423 8,590 30,169
======= ======= ======= ======= =======
1993
Operating revenues $ 40,170 40,406 41,713 41,625 163,914
======= ======= ======= ======= =======
Net income (loss) $ (16,383) 7,038 7,540 7,508 5,703
======= ======= ======= ======= =======
(12) RELATED PARTY TRANSACTIONS
Lincoln Telephone had sales to LinTel for access and billing services of
approximately $5,165,000 in 1994, $5,463,000 in 1993 and $5,482,000 in
1992.
(13) PROPERTY AND STATE INCOME TAXES
Lincoln Telephone'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
(Continued)
<PAGE>
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
Notes to Financial Statements
(13) PROPERTY AND STATE INCOME TAXES, CONTINUED
made applicable to 1989 taxes. As a result of these actions, Lincoln
Telephone recorded refunds or credits of approximately $1,328,000 and
$1,446,000 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.
(14) DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and Cash Equivalents, Investments and Other
Assets, Receivables and Accounts Payable
The carrying amount approximates fair value because of the short
maturity of these instruments.
Temporary Investments
The fair values of Lincoln Telephone's marketable investment
securities are based on quoted market prices. See note 3 for the
estimated fair value of temporary investments.
Long-Term Debt
The fair values of each of Lincoln Telephone's long-term debt
instruments are based on the amount of future cash flows associated
with each instrument discounted using Lincoln Telephone's current
borrowing rate on similar debt instruments of comparable maturity.
The long-term debt has a carrying value of $44,000,000 at December 31,
1994 and 1993 and an estimated fair value of $46,729,000 and
$54,021,000 at December 31, 1994 and 1993, respectively.
Limitations
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and, therefore,
cannot be determined with precision. Changes in assumptions could
significantly affect the estimates.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment to be
signed on its behalf by the undersigned, thereunto duly authorized.
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
By /s/ Michael J. Tavlin Date March 25, 1996
Michael J. Tavlin, Vice President-Treasurer
<PAGE>
Exhibit Index
Exhibit Title Page No.
3.
(a) Certificate of Incorporation as amended effective
through April, 24, 1985, was filed as an exhibit to the
Company's Form 10-K for the year ending December 31,
1992, incorporated by reference.
(b) By-Laws as amended through December 14, 1994,
are attached hereto.
<PAGE>
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY
BY - LAWS
(As Amended Through December 14, 1994, Effective December 14, 1994)
- - -
OFFICES
1. The principal office of the Corporation shall be at 1440 M
Street, in the City of Lincoln, Lancaster County, State of Nebraska.
The Corporation shall also have an office in Wilmington, County of New
Castle, State of Delaware, and the name of the resident agent in charge
thereof is THE CORPORATION TRUST COMPANY.
The Corporation may also have an office in such other cities
and states as the Board of Directors may from time to time appoint or
the business of the Corporation may require.
SEAL
2. The corporate seal shall have inscribed thereon the name of
the Corporation, the year of its organization and the words "CORPORATE
SEAL, DELAWARE."
STOCKHOLDERS' MEETINGS
3. The annual meeting of the stockholders shall be held in the
Corporation's offices at 1440 M Street, in the City of Lincoln,
Nebraska, or other location fixed by the Board of Directors and stated
in the notice of the meeting. Special meetings of the stockholders may
be held at such places as may be designated in the call therefor.
4. The annual meeting of stockholders shall be held on a date,
time and place determined by the Board of Directors at its last regular
meeting during the previous year, when the stockholders shall elect, by
ballot, successors to the class of directors whose term expires at that
annual meeting and any additional director of any class nominated to
fill a vacancy resulting from an increase in such class determined by
the Board of Directors in an aggregate number fixed by the board
pursuant to By-Law 12(b), and transact such other business as may
properly be brought before the annual meeting.
5. The holders of a majority of the stock issued and outstanding,
and entitled to vote thereat, present in person, or represented by
proxy, shall be requisite and shall constitute a quorum at any or all meetings
of the stockholders for the transaction of business except as
otherwise provided by law, or by these By-Laws. If, however, such
majority shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in
person, or by proxy, shall have power to adjourn the meeting from time
to time, without notice other than announcement at the meeting, until
(Continued)
<PAGE>
the requisite amount of stock shall be present. At such adjourned
meeting at which the requisite amount of stock shall be represented any
business may be transacted which might have been transacted at the meeting as
originally notified.
6. At any meeting of the stockholders every stockholder having
the right to vote shall be entitled to vote in person, or by proxy
appointed by an instrument in writing executed by such stockholder or by
his duly authorized attorney-in-fact. Each stockholder shall have one
vote for each share of stock having voting power registered in his name
on the books of the corporation. In all elections for directors every
stockholder having the right to vote at such elections shall have the
right to vote in person or by proxy the number of shares owned by him
for as many persons as there are directors to be elected, or (unless no
longer prescribed by the Nebraska Business Corporation Act) to cumulate
said shares and give one candidate as many votes as the number of
directors to be elected multiplied by the number his shares shall equal,
or to distribute them upon the same principle among as many candidates
as he shall think fit. Directors shall be elected in no other manner.
If the transfer books are not closed and no record date is
fixed by the Board of Directors, the date on which notice of the meeting
is mailed shall be deemed to be the record date for the determination of
stockholders entitled to vote at such meeting. Transferees of shares
transferred after the record date shall not be entitled to notice of or
to vote at such meeting.
7. Written notice of the annual meeting shall be mailed to each
stockholder entitled to vote thereat at such address as appears on the
books of the Corporation, at least ten days prior to the meeting.
8. A complete list of the stockholders entitled to vote at the
ensuing election, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the
name of each stockholder, shall be prepared by the secretary and filed
in the Corporation's principal office at least ten days before the
election, and shall at all times, during the usual hours for business
during such ten (10) day period at the principal office, and during the
whole time of said election at the place of election be open to the
examination of any stockholder.
9. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute, may be called by the
president, and shall be called by the president or secretary at the
request in writing of stockholders owning a majority in amount of the
common stock of the Corporation issued and outstanding, and entitled to
vote. Such request shall state the purpose or purposes of the proposed
meeting.
10. Business transacted at all special meetings shall be confined
to the objects stated in the call.
11. Written notice of a special meeting of stockholders, stating
the time and place and object thereof, shall be mailed to each
stockholder entitled to vote thereat at such address as appears on the
books of the Corporation, at least ten days prior to such meeting.
(Continued)
<PAGE>
DIRECTORS
12.(a) The property and business of the Corporation shall be
managed by its Board of Directors which shall have and shall exercise
all the powers of the Corporation. Directors of the Corporation need
not be stockholders. The number of directors which shall constitute the
whole Board of Directors shall be such as from time to time shall be
fixed in the manner provided in 12(b) of these By-Laws; provided,
however, the number of directors which shall constitute the whole Board
shall be not less than twelve (12) or more than eighteen (18).
The directors shall be divided into three classes. Each class
shall consist, as nearly as may be possible, of one-third of the total
number of directors constituting the whole board of directors. At each
annual meeting of stockholders, successors to the class of directors
whose term expires at that annual meeting shall be elected for a three
year term. A director shall hold office until the annual meeting in the
year in which the director's term expires and until the director's
successor shall be elected and qualified, subject however, to prior
death, resignation, retirement, disqualification or removal from office.
If the number of directors is changed, any increase or
decrease shall be apportioned among the classes so as to maintain the
number of directors in each class as nearly equal as possible, and any
additional director of any class elected to fill a vacancy resulting
from an increase in such class shall hold office for a term that shall
coincide with the remaining term of that class, but in no case will a
decrease in the number of directors shorten the term of any director
then in office. The termination of employment other than by retirement
of any director who is an employee of the Corporation shall be cause for
disqualification from further board membership unless waived by the
board. Any vacancy on the Board of Directors may be filled by the
affirmative vote of the majority of the directors then in office,
although less than a quorum, and the person filling such vacancy shall
have the same remaining term as that of his predecessor.
(b) The number of directors to serve during any year shall be
fixed by resolution of the Board of Directors at its last regular
meeting during the previous calendar year, but may also be fixed by
resolution of the Board of Directors or the executive committee at a
regular or special meeting of the board or executive committee held
prior to the annual meeting of stockholders in the year of such annual
meeting. In the event of failure of the board or executive committee to
fix the number of directors at such meetings, the number shall be the
same as last fixed by the Board of Directors.
13. The directors may hold their meetings and have one or more
offices, and keep the books and records of the Corporation outside of
Delaware, or at such other places as the Board may from time to time
determine.
14. In addition to the powers and authority by these By-Laws
expressly conferred upon them, the board may exercise all such powers of
the Corporation and do all such lawful acts and things as are not by
statute or by the certificate of incorporation or by these By-Laws
directed or required to be exercised or done by the stockholders.
(Continued)
<PAGE>
COMMITTEES OF DIRECTORS
15. The Board of Directors may, by resolution passed by a majority
of the whole board, designate one or more committees, each committee to
consist of three (3) or more of the directors and shall have such
functions and responsibilities as the board shall prescribe in said
resolution of appointment. Such committee or committees shall have such
name or names as may be determined from time to time by resolution of
the board.
The committees shall keep regular minutes of their proceedings
and report the same to the board as required.
EXECUTIVE COMMITTEE
16. There shall be an executive committee appointed annually by
the board at its first meeting following the annual meeting of the
stockholders in each year, consisting of not less than three (3) nor
more than seven (7) of the directors as fixed by the board's resolution
of appointment and shall include the president.
The executive committee shall have and may exercise all powers
of the Board of Directors when the board is not in session. Meetings of
the executive committee may be called by the president or a member of
the committee upon at least two days' prior oral notice or written
notice delivered personally or by facsimile transmission. At all
meetings of the executive committee a majority of the number of
directors as appointed to the committee by the Board of Directors shall
constitute a quorum for the transaction of business.
COMPENSATION OF DIRECTORS
17. Directors shall receive such compensation for their services
as may be determined by resolution of the board from time to time and,
in addition, expenses of attendance, if any, at each regular or special
meeting of the board; provided that nothing herein contained shall be
construed to preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor.
18. Members of special or standing committees may be allowed
compensation for attending committee meetings as determined by the
board.
MEETINGS OF THE BOARD
19. The first meeting of each Board with newly elected members
shall be held at such place and time as shall be fixed by the vote of
the stockholders at the annual meeting, for the purpose of organization
or otherwise, and no notice of such meeting shall be necessary to the
members of the Board in order to legally constitute the meeting; PROVIDED, a
majority of the whole board shall be present; or they may meet at such place
and time as shall be fixed by the consent in writing of all the directors.
20. Regular meetings of the board may be held without notice at
such time and place as shall from time to time be determined by the
board.
(Continued)
<PAGE>
21. Special meetings of the Board of Directors may be called by
the president on three (3) days' notice to each director by mail or
forty-eight (48) hours' notice by personal delivery of written notice,
by telegram or by facsimile transmission; special meetings shall be
called by the president or secretary in like manner and on like notice
on the written request of two directors. In all cases, notice shall be
addressed or other wise delivered to the director at the director's last
known address.
22. At all meetings of the board a majority of the directors shall
be necessary and sufficient to constitute a quorum for the transaction
of business, and the act of a majority of the directors present at any
meeting at which there is a quorum, shall be the act of the Board of
Directors, except as may be otherwise specifically provided by statute
or by the Certificate of Incorporation or by these By-Laws.
OFFICERS
23. The officers of the corporation shall be elected by the
directors and shall be a president, one or more vice presidents, a
secretary, a treasurer and a controller. The Board of Directors may
also elect a chairman of the board, an executive vice president, a chief
financial officer, assistant secretaries, assistant treasurers and such
other officers as it shall determine. Any two of the aforesaid offices,
except those of president and executive vice president or vice
president, may be held by the same person.
24. The Board of Directors, at its first meeting after each annual
meeting of stockholders, shall elect a president, one or more vice
presidents, a secretary, a treasurer, and a controller, any may also elect a
chairman of the board and such other officers that it shall determine as are
provided for in By-Laws 24 of whom need to be a member of the board except
for the president and the chairman and all of whom shall hold their offices
for such terms and shall exercise such powers and perform such duties as are
prescribed in these By-Laws and as shall be determined from time to time by
the Board of Directors.
25. The board may appoint such other officers and agents as it
shall deem necessary, who shall hold their offices for such terms and
shall exercise such powers and perform such duties as are prescribed in
these By-Laws and as shall be determined from time to time by the board.
26. The compensation, if any, of all officers and agents of the
corporation shall be fixed by the Board of Directors.
27. The officers of the corporation shall hold office until their
successors are elected and qualify in their stead. Any officer elected
or appointed by the Board of Directors may be removed and his employment
terminated at any time by the affirmative vote of a majority of the
whole Board of Directors, and any officer may be removed and his
employment terminated at any time by the president. If the office of
any officer becomes vacant for any reason, the vacancy shall be filled
by the Board of Directors.
PRESIDENT
28. The President shall be the chief executive officer of the
Corporation; he shall be a member of the executive committee and ex
(Continued)
<PAGE>
officio a member of all other committees of the board; he shall have
responsibility for the general and active management of the business and
affairs of the Corporation, and shall see that all orders and
resolutions of the board are carried into effect.
He shall execute conveyances of land, bonds, mortgages and
other contracts requiring a seal, under the seal of the Corporation
except where required by law to be otherwise signed and executed and
except where the signing and execution thereof shall be delegated by the
Board of Directors to some other officer or agent of the Corporation.
CHAIRMAN OF THE BOARD
29. The Board of Directors may elect a chairman of the board. He
shall preside at all meetings of the Board of Directors and stockholders
and shall have such other duties and responsibilities in respect to the
operations of the Corporation as the board and the president may from
time to time prescribe.
EXECUTIVE VICE PRESIDENT
30. An executive vice president, when elected, shall in the
absence or disability of the president, perform the duties and exercise
the powers of the president and shall perform such other duties as the
Board of Directors and president may from time to time prescribe.
VICE PRESIDENTS
31. The vice presidents in the order of their length of service
shall in the absence or disability of the president or an executive vice
president, perform the duties and exercise the powers of the president
and shall perform such other duties as the Board of Directors and
president may from time to time prescribe.
THE SECRETARY
32. The secretary shall attend all meetings of the board and all
meetings of the stockholders and record all votes and the minutes of all
proceedings in a book to be kept for that purpose and shall perform like
duties for the committees of the board when required. He shall give, or
cause to be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors, and shall perform such other
duties as may be prescribed from time to time by the Board of Directors
or the president under whose supervision he shall be. He shall keep in
safe custody the seal of the Corporation and, when authorized by the
board, affix the same to any instrument requiring it, and, when so
affixed, it shall be attested by his signature or by the signature of an
assistant secretary.
THE TREASURER
33.(a) The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit
all moneys, and other valuable effects in the name of and to the credit
of the Corporation, in such depositories as may be designated by the board of
directors.
(Continued)
<PAGE>
(b) He shall disburse the funds of the Corporation as may be
ordered by the board, taking proper vouchers for such disbursements, and
shall render to the president and directors, at the regular meetings of
the board, or whenever they may require it, an account of all his
transactions as treasurer.
(c) He shall give the Corporation a bond if required by the
Board of Directors in a sum, and with one or more sureties satisfactory
to the board, for the faithful performance of the duties of his office,
and for the restoration to the Corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or
under his control belonging to the Corporation.
THE CONTROLLER
34. The controller shall be the chief accounting officer of the
Corporation and have full responsibility and control of the accounting
department, which department shall include all accounting functions
carried on in all of the Corporation's offices, plants, branches and
subsidiaries. As such he shall, subject to the approval of the Board of
Directors, establish accounting policies. He shall standardize and
coordinate accounting practices, supervise all accounting records and
the preparation of all financial statements and tax returns. The
controller shall also direct the internal auditing of the Corporation
and keep the Audit Committee of the Board of Directors and the president
informed as to occurrences and procedures that may need their attention.
He shall have such other powers and duties as, from time to time, may be
prescribed by the Board of Directors and the president.
ASSISTANT SECRETARY AND ASSISTANT TREASURER
35. In the absence of the secretary or treasurer their duties
shall be performed respectively by the assistant secretary and assistant
treasurer if previously elected and serving in conformity with the
duties of the secretary and the treasurer as hereinabove set forth.
36. If the office of any director, or of any officer or agent,
becomes vacant by reason of death, resignation, retirement,
disqualification, removal from office, or otherwise, the directors by a
majority vote of the entire board, may choose a successor or successors,
who shall hold office for the unexpired term in respect of which such
vacancy occurred.
DUTIES OF OFFICERS MAY BE DELEGATED
37. In case of the absence of any officer of the Corporation, or
for any other reason that the board may deem sufficient, the board may
delegate, for the time being, the powers or duties, or any of them, of
such officer to any other officer, or to any director, PROVIDED a majority of
the entire board concur therein.
CERTIFICATES OF STOCK
38. The certificates of stock of the Corporation shall be
differentiated between common and preferred stock and numbered and shall
be entered in the books of the Corporation or the transfer agent or
registrar of the Corporation as they are issued. They shall exhibit the
(Continued)
<PAGE>
holder's name and number of shares and shall be signed by the president,
the chairman of the board, an executive vice president, or a vice
president and by the treasurer or an assistant treasurer or the
secretary or an assistant secretary, and the seal of the Corporation
shall be affixed thereto. The signatures of any of the aforesaid
officers and the seal of the Corporation may be facsimiles engraved,
lithographed, stamped or printed. The certificates shall be
countersigned by the transfer agent and registrar of the Corporation.
If any officer who has signed or whose facsimile signature has
been used on any such certificate shall cease to be such officer of the
Corporation, whether because of death, resignation or otherwise, before
such certificate has been delivered by or on behalf of the Corporation,
such certificate when countersigned by the transfer agent and registrar
of the Corporation, shall nevertheless be as effective in all respects
as though the person who signed such certificate or whose facsimile
signature shall have been used thereon had not ceased to be an officer
of the Corporation. The procedures set forth in this By-Law 38 shall
apply to all certificates of stock of the Corporation issued on or after
May 1, 1993.
TRANSFER OF STOCK
39. Transfers of stock shall be made on the books of the
Corporation only by the person named in the certificate or by attorney,
lawfully constituted in writing, and upon surrender of the certificate
therefor.
CLOSING OF TRANSFER BOOKS
40. The Board of Directors shall have power to close the stock
transfer books of the Corporation for a period not exceeding forty days
preceding the date of any meeting of stockholders or the date for
payment of any dividend or the date when any change or conversion or
exchange of capital stock shall go into effect; PROVIDED, however, that
in lieu of closing the stock transfer books as aforesaid, the Board of
Directors may fix in advance a date, falling within any forty day period
described above, as a record date for the determination of the
stockholders entitled to notice of, and to vote at, any such meeting, or
entitled to receive payment of any such dividend, or to act upon any
such change or conversion or exchange of capital stock, and in such case
only such stockholders as shall be stockholders of record on the date so
fixed shall be so entitled, notwithstanding any transfer of any stock on
the books of the Corporation after any such record date fixed as
aforesaid.
REGISTERED STOCKHOLDERS
41. The Corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact thereof and
accordingly shall not be bound to recognize any equitable or other claim
to or interest in such share on the part of any other person, whether or
not it shall have express or other notice thereof, save as expressly
provided by the laws of Delaware.
LOST CERTIFICATE
42. Any person claiming a certificate of stock to be lost or
destroyed shall make an affidavit or affirmation of that fact and
(Continued)
<PAGE>
advertise the same in such manner as the Board of Directors may require,
and shall if the directors so require give the Corporation a bond of
indemnity, in form and with one or more sureties satisfactory to the
board, in at least double the value of the stock represented by said
certificate, whereupon a new certificate may be issued of the same tenor
and for the same number of shares as the one alleged to be lost or
destroyed.
INSPECTION OF BOOKS
43. The Board of Directors shall determine from time to time,
whether, and, if allowed, when and under what conditions and regulations
the accounts and books of the Corporation (except such as may be statute
be specifically open to inspection) or any of them shall be open to the
inspection of the stockholders, and the stockholders' rights in this
respect are and shall be restricted and limited accordingly.
CHECKS
44. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers as the Board of Directors
may from time to time designate.
FISCAL YEAR
45. The fiscal year shall begin the first day of January and end
the thirty-first day of December in each year.
DIVIDENDS
46. Dividends upon the capital stock of the Corporation, when
earned, may be declared by the Board of Directors at any regular or
special meeting. Before payment of any dividend or making any
distribution of profits, there may be set aside out of the surplus or
net profits or the Corporation such sum or sums as the directors from
time to time, in their absolute discretion, think proper as a reserve
fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such
other purposes as the directors shall think conducive to the interests
of the Corporation.
DIRECTORS' ANNUAL STATEMENT
47. The Board of Directors shall present at each annual meeting,
and when called for by vote of the stockholders at any special meeting
of the stockholders, a full and clear statement of the business and
condition of the Corporation.
NOTICES
48. Whenever under the provisions of these By-Laws notice is
required to be given to any directory or stockholder, it shall not be
construed to require personal notice unless otherwise expressly required
in these By-Laws, but such notice may be given in writing, by mail, by
depositing the same in the post office or letter box, in a postpaid
sealed wrapper, addressed to such directory or stockholder at such
address as appears on the books of the corporation, or in default of
other address, to such directory or stockholder at the General Post
(Continued)
<PAGE>
Office in the City of Wilmington, Delaware, and such notice shall be
deemed to be given at the time when the same be thus mailed.
Whenever any notice whatever is required to be given under the
provisions of the Delaware General Corporation Law or under the
provisions of the Certificate of Incorporation or these By-Laws, a
waiver thereof in writing signed by the person or persons entitled to
such notice, whether before or after the date the notice is required,
shall be deemed equivalent to the giving of such notice.
AMENDMENTS
49. These By-Laws may be altered, amended or repealed by the
affirmative vote of a majority of the stock issued and outstanding and
entitled to vote thereon, at any regular annual meeting of the
stockholders without notice, and at any special meeting of the
stockholders if notice of the proposed alteration, amendment or repeal
be contained in the notice of such special meeting, or by the
affirmative vote of a majority of the Board of Directors if the
alteration, amendment or repeal be proposed at a regular meeting, or at
any special meeting of the Board of Directors at which a quorum is
present and a majority of those present vote in the affirmative, if
notice of the proposed alteration, amendment or repeal be contained in
the notice of such special meeting; provided, however, that no change of
the time or place for the election of directors shall be made within
sixty (60) days next before the day on which such election is to be
held, and that in case of any change of such time or place, notice
thereof shall be given to each stockholder in person or by letter mailed
to his last known post office address, at least twenty (20) days before
the election is held.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
50.(a) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, other than an action by or in the right
of the Corporation, by reason of the fact that he or she is or was a
director or officer of the Corporation or is or was serving at the
request (whether formal or informal) of the Corporation as a director,
officer, employee, agent or fiduciary of another corporation,
partnership, joint venture, employee benefit plan, trust or other
enterprise against expenses, including attorney's fee, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him
or her in connection with such action, suit or proceeding if he or she
acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interests of the Corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement or conviction or upon
a plea of nolo contenders or its equivalent shall not, of itself, create
a presumption that the person did not act in good faith and in a manner
which he or she reasonably believed to be in or not opposed to the best
interests of the Corporation and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his or her conduct was
unlawful.
(Continued)
<PAGE>
(b) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he or she is
or was a director or officer of the Corporation or is or was serving at
the request (whether formal or informal) of the Corporation as a
director, officer, employee, agent or fiduciary of another corporation,
partnership, joint venture, employee benefit plan, trust or other
enterprise against expenses, including attorney's fees, actually and
reasonably incurred by him or her in connection with the defense or
settlement of such action or suit if he or she acted in good faith and
in a manner he or she reasonably believed to be in or not opposed to the
best interests of the Corporation, except that no indemnification shall
be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable for negligence or misconduct in
the performance of his or her duty to the Corporation unless and only to
the extent that the court in which such action or suit was brought shall
determine upon application that despite the adjudication of liability
but in view of all circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which such court
shall deem proper.
(c) To the extent that a director or officer of the Corporation
has been successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in paragraphs (a) and (b) of this By-Law
50 or in defense of any claim, issue or matter therein, he or she shall
be indemnified by the Corporation, within ten (10) days of the
Corporation's receipt of his or her written request therefor, against
expenses, including attorney's fees, actually and reasonably incurred by
him or her in connection therewith.
(d) Any indemnification under paragraphs (a) and (b) of this
By-Law 50, unless ordered by a court, shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the
circumstances because he or she has met the applicable standard of
conduct set forth in paragraphs (a) and (b) of this By-Law 50. Such
determination shall be made, within thirty (30) days of the
Corporation's receipt of the director's or officer's request for
indemnification hereunder, by the board of directors by a majority vote
of a quorum consisting of directors who were not parties to such action,
suit or proceeding or, if such a quorum is not obtainable, or even if
obtainable, if a quorum of disinterested directors so directs, by
independent legal counsel I a written opinion or by the stockholders.
Payment of indemnification, if any, to a director or officer shall be
made by the Corporation within ten (10) days after the determination set
forth in the preceding sentence.
(e) Expenses incurred in defending a civil or criminal action,
suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding as authorized in
the manner provided in paragraph (d) of this By-Law 50 within ten (10)
days after the Corporation's receipt of an undertaking by or on behalf
of the director or officer to repay such amount if it shall ultimately
be determined that he or she is not entitled to be indemnified by the
Corporation as authorized in this By-Law 50.
(Continued)
<PAGE>
(f) For purposes of this By-Law 50, (I) the Corporation shall be
deemed to have requested a director or officer to serve an employee
benefit plan when the performance by him or her of his or her duties to
the Corporation also imposes duties on, or otherwise involves services
by, him or her to the plan or participants or beneficiaries of the plan;
(ii) the excise taxes assessed on a director or officer with respect to
an employee benefit plan pursuant to applicable law shall be deemed
fines; and (iii) action taken or omitted by a director or officer with
respect to an employee benefit plan in the performance of his or her
duties for a purpose reasonably believed by him or her to be in the
interest of the participants and beneficiaries of the plan shall be
deemed to be for a purpose which is not opposed to the best interests of
the Corporation.
(g) This By-Law 50 shall be deemed to be a contract between the
Corporation and each of its directors and officers and any repeal or
other limitation of this By-Law 50 shall not limit any rights to
indemnification or the advance of expenses then existing or arising out
of events, acts or omissions occurring prior to such repeal or
limitation, including, without limitation, the right to indemnification
or advance of expenses for proceedings commenced after such repeal or
limitation to enforce this By-Law 50 with regard to acts, omissions or
events arising prior to such repeal or limitation. The rights of a
director or officer granted under this By-Law 50 shall not be deemed
exclusive of any other rights to indemnification or advance of expense
which the director or officer may be entitled to under any written
agreement, board of directors' resolution, vote of stockholders or
otherwise.
(h) The terms and provisions of this By-Law 50 shall continue as
to each director and officer of the Corporation subsequent to the date
on which they are no longer such a director or officer and such terms
and provisions shall inure to the benefit of the heirs, estate, personal
representatives, executors and administrators of each director and
officer and the successors and assigns of the Corporation, including,
without limitation, any successor to the Corporation by way of merger,
consolidation and/or sale or disposition of all or substantially all of
the assets or capital stock of the Corporation.
(i) In order for the Corporation to obtain and retain qualified
directors and officers, the foregoing provisions of this By-Law 50 shall be
liberally construed and administered n order to afford maximum
indemnification of directors and officers and, accordingly, the
indemnification rights provided for above shall be granted in all cases
unless to do so would clearly contravene applicable law, controlling
precedent or public policy. If any provision of this By-Law 50 shall be
deemed invalid or inoperative, or if a court of competent jurisdiction
determines that any of the provisions of this By-Law 50 contravene
public policy, this By-Law 50 shall be construed so that the remaining
provisions shall not be affected, but shall be construed so that the
remaining provisions shall not be affected, but shall remain in full
force and effect, and any such provisions which are invalid or
inoperative or which contravene public policy shall be deemed, without
further action or deed by or on behalf of the Corporation, to be
modified, amended or limited, but only to the extent necessary to render
the same valid and enforceable.
