SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 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 number 1-4996-2
ALLTEL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 34-0868285
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Allied Drive, Little Rock, Arkansas 72202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (501) 661-8000
(Former name, former address and former fiscal year, if changed
since last report)
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
Number of common shares outstanding as of March 31, 1994
187,761,000
The Exhibit Index is located at sequential page 12 .
<PAGE>
ALLTEL CORPORATION
FORM 10-Q
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
The following consolidated financial statements of ALLTEL
Corporation and subsidiaries, included in the interim report of
ALLTEL Corporation to its stockholders for periods ended
March 31, 1994, a copy of which is attached hereto, are
incorporated herein by reference:
Consolidated Statements of Income - for the three and
twelve months ended March 31, 1994 and 1993.
Consolidated Balance Sheets - As of March 31, 1994 and 1993
and December 31, 1993.
Consolidated Statements of Cash Flows - for the three and
twelve months ended March 31, 1994 and 1993.
2
<PAGE>
ALLTEL CORPORATION
FORM 10-Q
PART I - FINANCIAL STATEMENTS
Item 2. Management's Discussions and Analysis of Financial
Condition and Results of Operations
FINANCIAL CONDITION
The Company's total capital structure was $3.284 billion at
March 31, 1994, compared to a total capital structure of $3.204
billion at December 31, 1993, reflecting 49% common and preferred
equity and 51% debt at both dates. This strong financial
performance continues to provide the Company the flexibility to
make necessary and desirable capital expenditures and to expand
its presence in the telecommunications and information services
markets.
Capital expenditures are forecasted at $519.3 million for
1994, which is expected to be primarily from internally generated
funds. The majority of the Company's capital expenditures
continue to be directed toward telephone operations to modernize
its network and to invest in new equipment to provide new
telecommunications services. Capital expenditures are also used
for expansion into new cellular and information services markets,
as well as to upgrade existing cellular network facilities.
Capital expenditures were $109.6 million in the first quarter of
1994 compared to $86.2 million in the first three months of 1993.
Internally generated funds financed the majority of the capital
expenditures in the three and twelve month periods ended
March 31, 1994 and 1993.
The Company has a $500 million revolving credit agreement.
Total borrowings outstanding against this agreement were $262.1
million at March 31, 1994, compared to $214.5 million at
December 31, 1993. At March 31, 1993, no amounts were
outstanding under this agreement. The increases in borrowings
under the revolving credit agreement were incurred to partially
finance the acquisition of certain telephone properties of GTE
Corporation ("GTE"), for expansion of cellular investments and
for other general corporate requirements. In April 1994, the
Company issued $250 million of 7.25%, twenty year debentures.
The proceeds were used to reduce borrowings under the Company's
revolving credit agreement.
3
<PAGE>
The increase in the revolving credit borrowings represent
the majority of long-term debt issued in the first quarter of
1994. The issuance of $400 million of 6.5% debentures by the
Company and a subsidiary to finance the acquisition of certain
telephone properties of GTE and the increase in the revolving
credit agreement borrowings account for the majority of long-term
debt issued during the twelve months ended March 31, 1994.
RESULTS OF OPERATIONS
Telephone Operations
In the fourth quarter of 1993, the Company purchased all of
the assets of the telephone operations of GTE in the state of
Georgia ("GTE Georgia") in exchange for the Company's telephone
operations in Illinois, Indiana and Michigan and $443 million in
cash. The exchange was accounted for as a purchase, and
accordingly, GTE Georgia's results of operations have been
included in the consolidated financial statements beginning
November 1, 1993.
Telephone operations revenues and sales increased $51.9
million or 21% and $109.0 million or 11% for the three and twelve
months ended March 31, 1994, respectively. Telephone operating
income increased $18.2 million or 22% and $48.3 million or 15%
for the three and twelve months, respectively. The acquisition
of the GTE Georgia properties accounted for $43.4 million and
$70.6 million of the increase in revenues and sales, and $14.6
million and $23.6 million of the increase in operating income for
the three and twelve months ended March 31, 1994, respectively.
Local service revenues increased $22.0 million or 30% and
$45.3 million or 16% in the three and twelve month periods,
respectively, primarily due to the GTE Georgia acquisition and
increases in customer access lines and growth in custom calling
feature revenues. There were no local rate increases granted to
any of the Company's telephone operating subsidiaries in the
first quarter of 1994, and management does not anticipate filing
for any local rate increases during the remainder of 1994.
Network access and long-distance revenues increased $23.3
million or 17% and $53.7 million or 10% for the three and twelve
month periods, respectively. The increases were primarily due to
the GTE Georgia acquisition, an increase in universal service
fund revenues and higher volumes of access connections. These
increases were partially offset by the impact of changing from an
average schedule to cost method of settling interstate access
revenues by one of the Company's telephone operating
subsidiaries.
4
<PAGE>
Miscellaneous revenues increased $6.6 million or 22% and
$10.0 million or 8% for the three and twelve month periods,
respectively. The increases are primarily due to the GTE Georgia
acquisition and increases in directory advertising, rental
revenue and sales of customer-owned telephone equipment
maintenance and protection plans. These increases were partially
offset by a decrease in billing and collection revenues.
Total telephone operating expenses increased $33.7 million
or 21% and $60.7 million or 10% for the three and twelve month
periods, respectively. The acquisition of the GTE Georgia
properties accounted for $28.9 million and $47.0 million of the
increase in operating expenses for the three and twelve month
periods, respectively. The other increases were primarily due to
increased expense for maintenance and repair of cable, digital
electronic switching and circuit equipment, increased
depreciation expense and an increase in information service
charges. These increases were partially offset by lower
maintenance expense related to electro-mechanical switching
equipment.
Information Services
The information services segment provided solid operating
results and produced double-digit revenue growth. Revenues and
sales reflect increases of $42.0 million or 27%, and $130.2
million or 22% for the three and twelve month periods,
respectively. Operating income reflects increases of $.3 million
or 1% and $17.3 million or 17% for the three and twelve month
periods, respectively.
Information services revenues and sales increased for both
periods as a result of new outsourcing and remote processing
contracts including telecommunications operations, new item
processing operations, additional services provided under
existing facilities management contracts, an increase in the
number of loans processed, and increased usage of new mortgage
processing services offerings. The increased nationwide
refinancing activity also contributed to revenue growth through
additional transaction processing fees. The acquisition of TDS
Healthcare Systems Corporation ("TDS") effective October 1, 1993,
also contributed to the increase in revenues and sales for both
periods.
Operating income increased for the three and twelve month
periods primarily due to the revenue increases previously
mentioned. Operating income for the three month period was
partially offset by a reduction in license fee revenues,
increased costs to procure and support additional international
service contracts, increases in software development expense,
depreciation expense, and a reduction in fees collected on early
5
<PAGE>
termination of facilities management contracts. Operating income
in the twelve month period also increased due to fees collected
on contract terminations, partially offset by a decrease in check
processing operations.
Product Distribution Operations
The product distribution segment showed improved earnings
but continues to be impacted by market conditions and
competition. Revenues and sales reflect increases of $9.8
million or 11% and $2.7 million or 1% for the three and twelve
month periods, respectively. Operating income reflects an
increase of $.7 million or 14% for the three month period and a
decrease of $1.4 million or 7% for the twelve month period.
The increase in revenues and sales for the three month
period is primarily due to growth in sales of telecommunications
and data products to new and existing customers, including sales
to affiliates. The increase in revenues and sales for the twelve
month period is primarily due to increased sales of
telecommunications and data products to new and existing
customers, including sales to affiliates, partially offset by
decreased sales in the wire and cable operations.
Operating income increased in the three month period
primarily because of the increase in revenues and sales noted
above. The decrease in operating income for the twelve month
period reflects the decrease in sales and profit margins of
electrical wire and cable products as a result of sluggish market
conditions and intense competitive pressures.
Cellular Operations
Cellular operations continue to make increasingly larger
contributions to the Company's earnings growth. Revenues and
sales reflect increases of $26.4 million or 65% and $88 million
or 63% for the three and twelve month periods, respectively.
Operating income reflects increases of $7.8 million or 108% and
$25.8 million or 98% for the three and twelve month periods,
respectively. During the twelve month period ended March 31,
1994, the number of cellular customers grew by 74%.
Cellular operations revenues and sales increased in both
periods primarily due to the significant growth in customer base.
The acquisition of new cellular properties and increased interest
in existing cellular properties also contributed to the growth in
revenues and sales for the twelve month period. Operating income
improved for all periods reflecting the increase in revenues and
sales noted above, partially offset by higher expenses for
selling and advertising, depreciation, and other operating
expenses.
6
<PAGE>
Other Operations
Other operations revenues and sales reflect an increase of
$32.6 million or 249% and $51.4 million or 89% for the three and
twelve month periods, respectively. Operating income reflects
increases of $2.3 million or 96% and $1.7 million or 17% for the
three and twelve month periods, respectively.
Other operations revenues and sales increased for both
periods due to increased revenues and sales from publishing
operations attributable to the purchase of the independent
telephone directory operations of GTE Directories Corporation in
October 1993. Paging operations also contributed to the growth
in revenues and sales for all periods as a result of steady
growth in its customer base. The increase in other operations
revenues and sales for the twelve month period was partially
offset by the sale of Ocean Technology, Inc. ("OTI") in the
second quarter of 1992.
Operating income increased in the three month period
primarily due to the increase in revenues and sales mentioned
above, partially offset by increases in directory services
expense, sales and marketing expenses, depreciation and other
operating expenses. Operating income increased in the twelve
month period primarily due to the increases in revenues and
sales, partially offset by the one-time costs incurred with the
purchase and start-up of the GTE directory publishing business
and the reduction in operating income due to the sale of OTI.
Corporate Expenses
Corporate expenses increased $2.3 million or 65% and $7.4
million or 46% for the three and twelve month periods,
respectively. The increases were primarily due to an increase in
operating expenses, an increase in deferred and incentive
compensation expense accruals, and a reduction in charges to
subsidiaries for cost of debt on new buildings.
Other Income, net
Other income, net decreased $2.6 million or 195% and $11.1
million or 104% for the three and twelve month periods,
respectively. The decrease for the three month period is
primarily due to an increase in the minority interest in earnings
of cellular operations, reflecting the improved operating results
of those cellular partnership interests not wholly-owned by the
Company. The decrease in the twelve month period is primarily
due to the elimination of equity income recognized from
investments in LDDS Communications, Inc. ("LDDS"). The Company's
investment in LDDS is now accounted for under the cost method,
since its ownership is less than 20 percent.
7
<PAGE>
Interest Expense
Interest expense increased $8.6 million or 38% and $14.5
million or 16% for the three and twelve month periods,
respectively. The increase in interest expense for all periods
is primarily due to an increase in long-term debt outstanding,
reflecting both the issuance of the $400 million debentures and
the increased borrowings under the Company's revolving credit
agreement, as previously discussed.
Net Gain on Exchange of Assets and Other
In the fourth quarter of 1993, the Company recorded a gain
on exchange of telephone properties with GTE, which was partially
offset by the reorganization of its telephone operations as a
result of this transaction. These transactions amounted to $69.9
million. In addition, the Company also recorded a partial write-
down of $42.5 million to reflect an impairment in the carrying
value of its product distribution operations. The net income
impact of these transactions is not significant to the results of
operations for the twelve month period.
Income Taxes
Income tax expense increased $7.1 million or 18% and $57.5
42% for the three and twelve month periods, respectively. The
increases primarily resulted from an increase in taxable income
and additional taxes due to the Revenue Reconciliation Act of
1993 which was enacted on August 10, 1993, and increased the
statutory federal corporate income tax rate 1 percent to 35
percent retroactive to January 1, 1993. For the twelve month
period, income tax expense does not reflect the tax benefit from
the write-down of product distribution operations since it
resulted in a capital loss and utilization of the benefit is not
certain.
Net Income Applicable to Common Shares
All earnings per share results and common shares
outstanding amounts have been restated to reflect the June 1993,
2-for-1 stock split in the form of a 100% stock dividend. Net
income applicable to common shares increased $8.8 million or 14%
and $28.8 million or 12% in the three and twelve month periods,
respectively. The twelve month period for 1994 includes the
effect of the net gain on exchange of telephone properties with
GTE partially offset by the reorganization of the Company's
telephone operations and the partial write-down of the product
distribution operations. The net income impact of these
transactions is not significant to the results of operations for
the twelve month period.
8
<PAGE>
Average Common Shares Outstanding
The average number of common shares outstanding increased
1% for both the three and twelve month periods ended March 31,
1994. The increase was primarily due to approximately 2 million
additional shares issued for the acquisition of TDS.
OTHER INFORMATION
Effective January 1, 1994, the Company, as required,
changed its method of accounting for certain postemployment
benefits by adopting Statement of Financial Accounting Standards
No. 112, "Employers' Accounting for Postemployment Benefits."
This statement requires the recognition of a liability for
postemployment benefits provided to former or inactive employees,
their beneficiaries and covered dependents on an accrual basis
compared to the current practice of recognizing these expenses
when paid. This change in accounting does not have a material
effect on the financial position or results of operations of the
Company.
9
<PAGE>
ALLTEL CORPORATION
FORM 10-Q
Part II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) See the exhibits specified on the Index of
Exhibits located at Sequential Page 12 .
(b) No reports on Form 8-K were filed during the first
quarter of 1994.
10
<PAGE>
ALLTEL CORPORATION
FORM 10-Q
The information furnished reflects all adjustments which, in the
opinion of management, are necessary to a fair statement of the
results for these interim periods. Such adjustments are of a
normal recurring nature.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ALLTEL CORPORATION
(Registrant)
/s/ Dennis J. Ferra
Dennis J. Ferra
Senior Vice President -
Accounting and Administration,
Chief Accounting Officer
May 12, 1994
11
<PAGE>
ALLTEL CORPORATION
FORM 10-Q
INDEX OF EXHIBITS
Form 10-Q Description Sequential
Exhibit No. Page No.
(20) Interim Report to Stockholders 13
and Notes to Consolidated
Financial Statements for periods
ended March 31, 1994
12
<PAGE>
<TABLE>
Exhibit 20
<CAPTION>
ALLTEL CORPORATION
HIGHLIGHTS (Unaudited)
(Dollars in thousands, except per share amounts)
THREE MONTHS ENDED MAR. 31 TWELVE MONTHS ENDED
Increase Increase
(Decrease) (Decrease)
1994 1993 % 1994 1993 %
<S> <C> <C> <C> <C> <C> <C>
Revenues and sales $ 709,408 $ 546,724 30 $ 2,504,771 $ 2,123,491 18
Net income $ 71,886 $ 63,156 14 $ 270,747 $ 242,186 12
Primary earnings per average common
share outstanding $.38 $.34 12 $1.43 $1.29 11
Excluding net gain on exchange of assets
of assets and other:
Net income $ 71,886 $ 63,156 14 $ 270,768 $ 242,186 12
Primary earnings per share $.38 $.34 12 $1.43 $1.29 11
Average common shares outstanding 189,560,000 186,825,000 1 188,273,000 186,171,000 1
Annual dividend rate per common share $.88 $.80 10
Total assets $ 4,389,790 $ 3,235,505 36
Telephone access lines 1,595,876 1,317,366 21
Cellular customers 322,447 184,982 74
</TABLE>
13
<PAGE>
<TABLE>
BUSINESS SEGMENTS (Unaudited)
(Dollars in thousands)
<CAPTION>
THREE MONTHS ENDED MAR. 31 TWELVE MONTHS ENDED MAR.
Increase Increase
(Decrease) (Decrease)
1994 1993 % 1994 1993 %
<S> <C> <C> <C> <C> <C> <C>
REVENUES AND SALES:
Telephone $ 294,292 $ 242,375 21 $ 1,068,011 $ 959,028 11
Information services 199,792 157,839 27 719,706 589,540 22
Product distribution 102,635 92,831 11 380,496 377,769 1
Cellular 67,058 40,617 65 227,656 139,658 63
Other operations 45,631 13,062 249 108,902 57,496 89
Total $ 709,408 $ 546,724 30 $ 2,504,771 $ 2,123,491 18
OPERATING INCOME:
Telephone $ 101,559 $ 83,325 22 $ 371,428 $ 323,177 15
Information services 29,329 29,050 1 116,887 99,540 17
Product distribution 5,389 4,708 14 17,675 19,069 (7)
Cellular 15,124 7,283 108 52,133 26,323 98
Other operations 4,649 2,372 96 11,468 9,808 17
Corporate expenses (5,773) (3,497) 65 (23,509) (16,084) 46
Total $ 150,277 $ 123,241 22 $ 546,082 $ 461,833 18
</TABLE>
14
<PAGE>
<TABLE>
ALLTEL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share amounts)
<CAPTION>
THREE MONTHS ENDED MAR. 31 TWELVE MONTHS ENDED MAR
1994 1993 1994 1993
<S> <C> <C> <C> <C>
REVENUES AND SALES $ 709,408 $546,724 $ 2,504,771 $ 2,123,491
COSTS AND EXPENSES:
Cost of products sold 104,390 86,529 370,981 353,902
Operations 319,633 227,257 1,099,600 878,877
Maintenance 35,242 31,418 134,983 123,939
Depreciation and amortization 82,928 63,806 291,558 249,237
Taxes, other than income taxes 16,938 14,473 61,567 55,703
Total costs and expenses 559,131 423,483 1,958,689 1,661,658
OPERATING INCOME 150,277 123,241 546,082 461,833
Other income, net (1,282) 1,349 (401) 10,686
Interest expense (31,485) (22,898) (107,333) (92,874)
Income before net gain on exchange of assets,
other, and income taxes 117,510 101,692 438,348 379,645
Net gain on exchange of assets and other - - 27,390 -
Income before income taxes 117,510 101,692 465,738 379,645
Federal and state income taxes 45,624 38,536 194,991 137,459
Net income 71,886 63,156 270,747 242,186
Preferred dividends 310 406 1,482 1,689
Net income applicable to common shares $ 71,576 $ 62,750 $ 269,265 $ 240,497
PRIMARY EARNINGS PER SHARE $.38 $.34 $1.43 $1.29
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
ALLTEL CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands)
ASSETS
MAR. 31, DEC. 31, MAR. 31,
1994 1993 1993
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and short-term investments $ 33,137 $ 7,881 $ 37,100
Accounts receivable 410,775 379,743 244,779
Materials and supplies 26,995 22,321 23,327
Inventories 74,938 68,673 62,599
Prepaid expenses 17,316 15,520 14,088
Total current assets 563,161 494,138 381,893
Investments 381,375 382,343 167,607
Excess of cost over equity in
subsidiary companies 498,179 508,227 400,901
PROPERTY, PLANT AND EQUIPMENT:
Telephone 3,566,190 3,555,020 2,869,925
Information Services 306,035 290,737 208,878
Other 254,152 235,884 187,751
Under construction 211,096 153,196 123,693
Total property, plant and equipment 4,337,473 4,234,837 3,390,247
Less accumulated depreciation 1,623,740 1,558,403 1,286,782
Net property, plant and
equipment 2,713,733 2,676,434 2,103,465
Other assets 233,342 209,316 181,639
TOTAL ASSETS $ 4,389,790 $ 4,270,458 $ 3,235,505
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
ALLTEL CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
MAR. 31, DEC. 31, MAR. 31,
1994 1993 1993
<S> <C> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 48,644 $ 44,138 $ 32,838
Accounts payable 184,323 221,569 156,550
Advance payments and customers' deposits 62,739 62,490 62,095
Accrued taxes 66,674 35,053 58,848
Accrued interest, dividends and other 223,028 209,395 111,083
Other current liabilities 36,264 35,937 46,759
Total current liabilities 621,672 608,582 468,173
DEFERRED CREDITS:
Investment tax credit 36,810 38,575 44,006
Income taxes 376,691 377,253 243,215
Total deferred credits 413,501 415,828 287,221
Long-term debt 1,640,433 1,596,032 1,029,616
Other liabilities 119,171 86,681 98,375
Preferred stock, redeemable 8,576 8,627 9,471
SHAREHOLDERS' EQUITY:
Preferred stock 9,385 9,405 9,470
Common stock 187,761 187,458 92,462
Additional capital 336,115 333,698 412,176
Unrealized holding gain on investments 120,423 121,507 -
Retained earnings 932,753 902,640 828,541
Total shareholders' equity 1,586,437 1,554,708 1,342,649
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,389,790 $ 4,270,458 $ 3,235,505
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows (Unaudited)
THREE MONTHS TWELVE MONTHS
ENDED MAR. 31, ENDED MAR. 31,
(Dollars in thousands) 1994 1993 1994 1993
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $125,536 $152,622 $541,560 $589,819
CASH USED IN INVESTING:
Additions to property, plant and equipment 109,593 86,243 449,522 373,689
Companies purchased, net of cash acquired - - 443,000 -
Sale of property - - - (8,394)
Additions to investments (3,580) 15,631 1,230 38,811
Other, net 5,160 14,887 76,808 41,774
Net cash used in investing activities 111,173 116,761 970,560 445,880
CASH (PROVIDED) USED IN FINANCING:
Dividends on preferred and common stock 41,773 37,287 158,596 138,948
Reductions in long-term debt 3,119 12,415 81,840 88,563
Long-term debt issued (53,448) (18,321) (663,390) (71,794)
Common stock issued (2,251) (2,198) (5,809) (8,284)
Other, net (86) 1 3,726 1,624
Net cash (provided) used in
financing activities (10,893) 29,184 (425,037) 149,057
Increase (decrease) in cash and
short-term investments 25,256 6,677 (3,963) (5,118)
CASH AND SHORT-TERM INVESTMENTS:
Beginning of period 7,881 30,423 37,100 42,218
End of period $ 33,137 $ 37,100 $ 33,137 $ 37,100
</TABLE>
18
<PAGE>
To ALLTEL Stockholders:
ALLTEL Corporation recently announced its financial results for the
quarter ended March 31, 1994.
First quarter earnings were 38 cents per share, compared with 34
cents per share a year ago, a 12 percent increase. Net income for the
first quarter of 1994 was $71,886,000, compared with $63,156,000 in
the first quarter of 1993, an increase of 14 percent. Revenues and
sales were $709,408,000, up 30 percent from $546,724,000 in the
corresponding quarter of 1993.
Earnings per share for the 12 months ended March 31, 1994 were
$1.43, compared with $1.29 a year ago, an 11 percent increase. Net
income was $270,747,000, compared with $242,186,000 in the year-ago
period, reflecting an increase of 12 percent. Revenues and sales were
$2,504,771,000, an increase of 18 percent over $2,123,491,000 in
1993.
ALLTEL continues to produce double-digit growth with all four
major business units contributing to earnings this quarter.
Telephone produced strong increases in revenues and operating
income due to our recent expansion in Georgia, steady access line
growth, and cost savings from restructuring efforts throughout our
telephone operations. The strength of these positives more than
offset the effect of regulatory action which was designed to reduce
earnings in Ohio.
Information services once again generated double-digit revenue
growth due largely to a surge in the number of significant new
contracts signed and the acquisition of TDS Healthcare Systems in
late 1993. Operating income growth reflected the slim margins on new
business, which is typical in the early stages of major contracts.
Also reflected is the traditionally uneven nature of the income
contribution from TDS, which is still primarily a software company.
Cellular continued to demonstrate strong momentum producing
revenue, operating income and customer growth rates that are among
the best in the industry. While this business unit accounted for 9
percent of ALLTEL's revenues, it produced 27 percent of the growth in
ALLTEL's operating income.
Product distribution showed improved performance, with sales
reaching an all-time high and operating income at its highest level
in five quarters.
Systematics Signs Major Contract with Russian Financial Institution
ALLTEL's Systematics subsidiary has signed the largest international
software and services agreement in the company's history. The
agreement is with the Savings Bank of the Russian Federation, Moscow
City Office, Moscow.
This long-term agreement includes the licensing of Systematics'
retail and wholesale application software, installation assistance,
training, continuous updates and consulting services.
19
<PAGE>
1994 Stockholders Meeting Results
At the Company's annual stockholders meeting held April 21 in Little
Rock, Ark., Ben W. Agee, Joe T. Ford, Emon A. Mahony Jr., John P.
McConnell and Ronald Townsend were elected to the office of director.
Stockholders also re-elected Arthur Andersen & Co. independent
auditors for the 1994 fiscal year.
In other action, stockholders voted to adopt the 1994 stock
option plans, as well as the performance incentive compensation
plans.
Board Declares Regular Quarterly Dividends
The Company's Board of Directors declared regular quarterly dividends
on ALLTEL common stock. The 22 cent dividend is payable July 5, 1994
to stockholders of record as of June 3, 1994.
Regular quarterly dividends were also declared on all series of
the Company's preferred stock. Preferred dividends are payable on
June 15, 1994 to stockholders of record as of May 27, 1994.
ALLTEL Implements Dividend Reinvestment and Stock Purchase Plan
ALLTEL's Board of Directors has approved a Dividend Reinvestment and
Stock Purchase Plan, which is being made available to all registered
common stockholders.
The plan offers participants the opportunity to invest cash
toward the purchase of ALLTEL common shares, in addition to
reinvesting dividends. The Company implemented the plan in response
to requests from stockholders who wanted a convenient way to acquire
more shares of ALLTEL common stock.
ALLTEL remains dedicated to enhancing both the short-term interests
of the stockholder and the long-term growth of the Company. We have
achieved this balance by expanding our business mix to include
faster-growing companies, while continuing to pursue opportunities in
our core telephone business. This strategy has produced exceptional
financial results and, going forward, positions the Company well for
continuing its strong record of performance.
Joe T. Ford,
Chairman and Chief Executive Officer
April 21, 1994
20
