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 September 30, 1995
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
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 September 30, 1995:
189,024,000
The Exhibit Index is located at sequential page 15 .
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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 September 30, 1995, a copy
of which is attached hereto, are incorporated herein by reference:
Consolidated Statements of Income - for the three, nine and
twelve months ended September 30, 1995 and 1994.
Consolidated Balance Sheets - September 30, 1995 and 1994 and
December 31, 1994.
Consolidated Statements of Cash Flows - for the nine
and twelve months ended September 30, 1995 and 1994.
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ALLTEL CORPORATION
FORM 10-Q
PART I - FINANCIAL STATEMENTS
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Total capital structure was $3.760 billion at September 30, 1995,
reflecting 49.7% common and preferred equity and 50.3% debt. This compares to
a capital structure of $3.531 billion at December 31, 1994, reflecting 46.3%
common and preferred equity and 53.7% debt. The Company has adequate internal
and external resources available to finance its ongoing operating requirements,
including capital expenditures, business development and the payment of
dividends.
Cash provided by operating activities, which is the Company's primary
source of liquidity, was $498.9 million and $702.8 million for the nine and
twelve month periods in 1995, respectively, compared to $377.0 million and
$556.8 million for the same periods in 1994. The increases for 1995 primarily
reflect the growth in earnings of the Company, partially offset by increases
in working capital requirements. In addition, cash totaling $95.9 million was
provided from the sale of property, primarily consisting of telephone
properties in Oregon and West Virginia, as further discussed below.
The primary uses of capital resources continue to be for capital
expenditures and for the payment of dividends. Capital expenditures for the
nine and twelve month periods in 1995 were $409.3 million and $590.8 million,
respectively, compared to $414.6 million and $548.0 million for the same
periods in 1994. The Company financed the majority of its capital expenditures
through the internal generation of funds. Capital expenditures are forecast
at $521.4 million for 1995, which are expected to be financed primarily from
internally generated funds. The Company's capital expenditures were directed
toward telephone operations to continue to modernize its network and invest in
equipment to provide new telecommunications services. In addition, capital
expenditures were incurred for expansion into existing cellular and information
services markets, and to upgrade the Company's cellular network facilities.
Common and preferred dividend payments for the nine and twelve month periods
in 1995 were $136.6 million and $182.1 million, respectively, compared to
$124.5 million and $166.3 million for the same periods in 1994.
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The Company has a $500 million revolving credit agreement. There were no
borrowings outstanding under this agreement at September 30, 1995, compared to
$132.0 million that was outstanding at December 31, 1994, and $158.6 million
that was outstanding at September 30, 1994. The reduction in revolving credit
agreement borrowings represent the majority of long-term debt retired in the
nine and twelve month periods.
In September 1995, the Company issued $200 million of 6.75 percent
debentures. The proceeds were temporarily applied to reduce borrowings
outstanding under the revolving credit agreement. At October 31, 1995, the
proceeds were reapplied to retire $200 million of long-term debt, consisting
of $150 million of 10.375 percent debentures due April 1, 2009 and $50 million
of 8.875 percent debentures due March 1, 2022. To fund the retirement of these
two debt issues, the Company borrowed $200 million under its revolving credit
agreement. As of October 31, 1995, the weighted average interest rate on the
revolving credit agreement borrowings was 6.02 percent. The completed debt
refinancing is expected to produce approximately $6.5 million in annual pre-tax
interest savings.
The issuance of the $200 million 6.75 percent debentures represents the
long-term debt issued in the nine month period ended September 30, 1995.
During the fourth quarter of 1994, subsidiaries issued $60 million of 8.05
percent notes and $30 million of 8.17 percent notes to refinance existing
high-cost indebtedness. The $200 million debentures and the issuance of the
notes by the subsidiaries account for the long-term debt issued during the
twelve months ended September 30, 1995.
RESULTS OF OPERATIONS
Telephone Operations
In November 1994, the Company signed definitive agreements to sell
certain telephone properties serving approximately 114,000 access lines
in Arizona, California, Nevada, New Mexico, Oregon, Tennessee, Utah and
West Virginia to Citizens Utilities Company ("Citizens") in exchange for
approximately $290 million in cash, assumed debt and 3,600 access lines in
Pennsylvania. The sale of the telephone properties in Oregon and West Virginia
were completed at the end of the second quarter of 1995, and resulted in a
pre-tax gain of $30.9 million. The sale of the remaining properties will be
completed on a state-by-state basis as necessary regulatory approvals are
obtained. The Company expects to complete the sale of the remaining properties
by the end of the first quarter of 1996, assuming the required regulatory
approvals are received and that all other conditions and requirements are
satisfied. The telephone properties to be disposed of represent approximately
6%, 8% and 9% of the telephone operations' revenues and operating income for
the three, nine and twelve month periods ended September 30, 1995,
respectively.
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In the fourth quarter of 1993, the Company purchased all of the assets
of the telephone operations of GTE Corporation ("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 $3.4 million or 1%,
$18.9 million or 2%, and $35.9 million or 3% for the three, nine, and twelve
months ended September 30, 1995, respectively. Telephone operating income
increased $1.4 million or 1%, $14.0 million or 5% and $15.7 million or 4% for
the three, nine and twelve month periods, respectively. The acquisition of the
GTE Georgia properties accounted for $38.8 million of the increase in revenues
and sales and $24.7 million of the increase in operating income for the twelve
month period, respectively. The increases in revenues and operating income as
a result of the GTE Georgia acquisition were partially offset by a reduction
in network access and long-distance revenues due to certain regulatory actions
discussed below.
Local service revenue increased $7.0 million or 7%, $19.3 million or 7%
and $31.1 million or 8% in the three, nine, and twelve month periods,
respectively. The increase in revenues for all periods primarily resulted
from growth in customer access lines and growth in custom calling feature
revenues. In addition, the acquisition of the GTE Georgia properties
accounted for $13.5 million of the increase in local service revenues for the
twelve month period. The growth in local service revenues for all periods was
partially offset by a reduction in revenues of approximately $2.0 million
reflecting the sale of the West Virginia and Oregon properties. There have
been no local rate increases granted to any of the Company's telephone
subsidiaries during 1995, and management does not anticipate filing for any
local rate increases during the remainder of 1995.
Network access and long-distance revenues decreased $5.3 million or 3%,
$4.5 million or 1% and $1.3 million for the three, nine and twelve month
periods, respectively. Growth in network access and long-distance revenues has
been impacted by certain regulatory commission actions designed to reduce
earnings levels in Ohio (effective May 1, 1994) and California (effective
January 1, 1995). Additionally in 1994, two of the Company's telephone
operating subsidiaries changed their method of settling interstate access
revenues from an average schedule to cost method. The effect of these
regulatory actions have resulted in net decreases in revenues of approximately
$1.4 million, $13.3 million and $21.3 million for the three, nine and twelve
month periods ended September 30, 1995, respectively. Network access and
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long-distance revenues also decreased in all periods by approximately $3.1
million as a result of the sale of the West Virginia and Oregon properties.
The decreases in revenues for the nine and twelve month periods resulting from
the regulatory actions and sale of properties were partially offset by higher
volumes of access usage. In addition, the acquisition of the GTE Georgia
properties increased revenues by approximately $22.8 million for the twelve
month period.
Miscellaneous revenues increased $1.7 million or 5%, $4.1 million or 4%
and $6.1 million or 4% for the three, nine and twelve month periods,
respectively. The increases in all periods were primarily due to increases in
direct sales of telephone equipment, sales of telephone equipment protection
plans and directory advertising revenues. Additionally, the acquisition of
the GTE Georgia properties accounted for $2.5 million of the increase in the
twelve month period.
Total telephone operating expenses increased $2.1 million or 1%, $4.9
million or 1%, and $20.2 million or 3% for the three, nine, and twelve month
periods, respectively. Operating expenses for all periods increased due to
increased expense for maintenance and repair of cable, increased information
service and engineering charges, increased depreciation expense and increased
cost of products sold related to direct sales of telephone equipment and
protection plans. These increases were partially offset by lower maintenance
expense related to buildings and electro-mechanical switching equipment, and
decreases in call completion services and other general and administrative
expenses, reflecting the Company's ongoing cost control efforts. The
acquisition of the GTE Georgia properties accounted for $14.1 million of the
increase in operating expenses for the twelve month period. The increases in
operating expenses for all periods were partially offset by a reduction in
expenses of approximately $3.9 million reflecting the sale of the West Virginia
and Oregon properties.
The Company's telephone subsidiaries follow the accounting for regulated
enterprises prescribed by Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulation" ("SFAS 71"). If
the Company's telephone subsidiaries no longer qualify for the provisions of
SFAS 71, the accounting impact to the Company would be an extraordinary
non-cash charge to operations of an amount that could be material. Criteria
that would give rise to the discontinuance of SFAS 71 include (1) increasing
competition that restricts the telephone subsidiaries' ability to establish
prices to recover specific costs, and (2) a significant change in the manner
in which rates are set by regulators from cost-based regulation to another
form of regulation. The Company periodically reviews these criteria to ensure
the continuing application of SFAS 71 is appropriate.
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Information Services
Revenues and sales for the information services segment reflect
increases of $17.1 million or 8%, $48.1 million or 8% and $90.9 million or 11%
for the three, nine and twelve month periods, respectively. Growth in
operating income for the information services segment continues to be
adversely affected by the number of mergers and consolidations occurring in
the financial services and mortgage industries. Additionally, operating
income has been impacted by lower margins realized on new and existing
outsourcing contracts and by a shift in revenues from software licensing fees
to software maintenance and processing revenues. As a result, operating
income increased only $1.2 million or 4%, and decreased $5.9 million or 6% and
$3.6 million or 3% for the three, nine and twelve month periods, respectively.
Information services' revenues and sales increased in all periods
primarily due to increases in the telecommunications and healthcare portions
of its outsourcing business. Telecommunications services' revenues increased
primarily due to volume growth in existing data processing contracts and the
addition of the outsourcing contract with Citizens announced in November 1994.
Healthcare services' revenues and sales increased primarily due to the
acquisition of Medical Data Technology, Inc. ("MDT") in November 1994.
Additional services provided under new and existing facilities management
contracts, additional software maintenance revenues, increased usage of
specialized programming service offerings and an increase in the number of
mortgage loans processed also contributed to the increase in revenues and
sales for all periods. The increases in revenues and sales for all periods
were partially offset by lost operations from contract terminations due
primarily to the merger and consolidation activity in the financial services
market, a reduction in revenues collected for early termination of facilities
management contracts, and by decreases in software licensing fees and
international software sales. Although the number of mortgage loans serviced
increased in all periods, growth in the related processing revenues has
occurred at a slower rate due to the consolidations in the mortgage industry.
These consolidations have resulted in lower incremental revenues realized on a
per loan basis.
The increase in operating income for the three month period reflects the
increase in revenues and sales previously discussed, partially offset by a
reduction in fees collected on the early termination of facilities management
contracts, the loss of higher margin operations due to contract terminations
and by an increase in operating costs including depreciation and amortization
expense. The decreases in operating income for the nine and twelve month
periods primarily resulted from the loss of higher margin operations due to
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contract terminations, an increase in operating costs including corporate
operations and depreciation and amortization expense, and by reductions in
high margin licensing fees and fees collected on the early termination of
facilities management contracts. The increase in corporate operating expenses
for the nine and twelve month periods reflects approximately $3 million in
severance pay costs relating to the planned workforce reduction announced by
this segment in June 1995. Depreciation and amortization expense increased in
all periods primarily due to the acquisition of additional data processing
equipment and due to an increase in amortization of internally developed
software.
As a result of the declining contributions from this segment's check
processing and community banking operations, the Company recorded a pre-tax
write-down of approximately $54.2 million to reflect the net realizable value
of these operations in December 1994. In accordance with the Company's plan
for the disposal of the check processing operations, the Company recorded an
additional $5.0 million pre-tax write-down in the second quarter of 1995 to
reflect the net realizable value of these operations. In August, the Company
announced that it had signed a definitive agreement to sell the check
processing operations. The sale was completed at the end of the third quarter.
Product Distribution Operations
Revenues and sales for the product distribution segment reflect increases
of $0.9 million or 1%, $22.6 million or 7% and $43.4 million or 10% for the
three, nine and twelve month periods, respectively. Operating income
increased $0.6 million or 8%, $3.8 million or 21% and $6.0 million or 27% for
the three, nine and twelve month periods, respectively.
The increases in revenues and sales for all periods were primarily due to
growth in sales of telecommunications and data products to new and existing
customers. Increased sales to affiliates accounted for approximately $6.8
million and $14.8 million of the increase in revenues and sales for the nine
and twelve month periods, respectively. Sales of electrical wire and cable
decreased slightly in the three month period primarily due to increased
competition, and increased slightly in the nine and twelve month periods due
to a higher demand for these products.
Operating income increased in all periods primarily because of the
increases in revenues and sales noted above. Increased profit margins of
electrical wire and cable products, primarily resulting from the increase in
copper prices, also contributed to the growth in operating income in the nine
and twelve month periods. These increases were partially offset by an
increase in selling-related expenses.
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Cellular Operations
Cellular operations continued to provide solid operating results and
contributed significantly to the Company's overall earnings growth. Revenues
and sales reflect increases of $27.8 million or 37%, $91.4 million or 45% and
$120.9 million or 47% for the three, nine and twelve month periods,
respectively. Operating income increased $9.3 million or 35%, $26.8 million
or 42% and $34.4 million or 45% for the three, nine and twelve month periods,
respectively. Subscriber growth remained strong, as more than 228,000 units
have been placed in service during the first nine months of 1995, reflecting
the results of several aggressive sales promotions. For the twelve month
period ended September 30, 1995, the number of cellular customers grew to
575,952 from 396,717, an increase of 179,235 customers or 45%.
Growth in customers for the three month period was partially offset by a
net decrease of approximately 21,000 customers due to the consummation at the
end of August of the previously announced agreement between ALLTEL Mobile
Communications, Inc. ("ALLTEL Mobile") and BellSouth Mobility. As a result of
this agreement, ALLTEL Mobile now owns a 53.5 percent interest in certain
cellular properties primarily located in South Carolina and no longer owns a
majority interest in the Jackson, Mississippi market. The impact of this
transaction on revenues and operating income for the three month period was
not significant.
Cellular operations revenues and sales increased in all periods primarily
due to the growth in its customer base. The acquisition of new cellular
properties also contributed to the growth in revenues and sales in all
periods. Operating income increased for all periods reflecting the increases
in revenues and sales noted above, partially offset by higher expenses for
selling and advertising, depreciation and other operating expenses.
Other Operations
Other operations revenues and sales decreased $2.4 million or 6%, $15.3
million or 12% and $16.3 million or 10% for the three, nine and twelve month
periods, respectively. Operating income decreased $2.0 million or 49%, $6.8
million or 52% and $8.1 million or 49% for the three, nine and twelve month
periods, respectively.
Revenues and sales for other operations decreased in all periods primarily
due to a change in accounting related to the publication of telephone
directories. Concurrent with the purchase of the independent telephone
directory operations of GTE Directories Corporation effective
October 1993, the Company began recognizing all revenues and expenses
related to a published directory in the month of publication, instead of
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recognizing the revenues and expenses ratably over a twelve month period. As a
result of this change, revenues and sales for the three, nine and twelve month
periods ended September 30, 1994 include approximately $2.1 million, $15.9
million and $26.0 million, respectively, of additional revenues related to
directories accounted for under the previous method. The decrease in revenues
and sales for the twelve month period attributable to the change in revenue
and expense recognition was partially offset by additional revenues of
approximately $5.8 million resulting from an increase in the number of
directories published.
Operating income decreased in all periods primarily due to the decreases
in revenues and sales previously noted. For all periods of 1995, operating
income also reflects lower margins realized on directories published for
affiliates. The lower margins resulted from increased fees paid to affiliates
for publishing rights under the terms of a new contract that became effective
January 1, 1995.
Corporate Expenses
Corporate operating expenses increased $1.2 million or 35%, $3.5 million
or 24% and $0.4 million or 2% for the three, nine and twelve month periods,
respectively. The increases in all periods primarily resulted from the
reclassification of the amortization of telephone plant acquisition
adjustments related to the GTE Georgia properties acquisition. For all
periods of 1994, this amortization expense was classified as non-operating
expense. The reclassification accounted for $1.0 million of the increase in
the three month period and $3.0 million of the increase in both the nine and
twelve month periods, respectively. The increase for the twelve month period
was partially offset by a reduction in employee benefit costs.
Other Income, Net
Other income, net increased $1.9 million or 68%, $7.7 million or 107%
and $8.6 million or 123% for the three, nine and twelve month periods,
respectively. The increases in all periods were primarily due to increases
in equity income recognized on investments in cellular limited partnerships
and increases in capitalized interest costs related to long-term construction
projects. In addition, other income, net for all periods of 1995 does not
include the amortization of telephone plant acquisition adjustments related
to the GTE Georgia properties acquisition that were reclassified to corporate
operating expenses, as previously discussed. The increases in all periods
were partially offset by increases in the minority interest in earnings of the
Company's cellular operations by others. The increases in equity income for
all periods reflects the improved operating results of those partnership
interests not managed by the Company.
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Interest Expense
Interest expense increased $1.8 million or 5%, $10.8 million or 11% and
$17.8 million or 14% for the three, nine and twelve month periods,
respectively, primarily due to an increase in long-term debt outstanding. The
increase in interest expense for the three month period reflects the issuance
of $200 million debentures in September 1995, as previously discussed. The
increases in interest expense for the nine and twelve month periods primarily
resulted from the issuance of $250 million debentures in April 1994 to reduce
borrowings under the Company's revolving credit agreement. The increase in
interest expense for the twelve month period also reflects the issuance of
$400 million debentures in November 1993 to finance the GTE Georgia properties
acquisition.
Gain on Disposal or Exchange of Assets, Write-down of Assets and Other
As previously discussed, during the second quarter of 1995, the Company
recorded a gain of $30.9 million on the sale of its telephone properties in
West Virginia and Oregon to Citizens, and the Company recorded an additional
write-down of $5.0 million to reflect the net realizable value of its
information services segment's check processing operations. The net income
impact from these transactions resulted in an increase of $16.6 million in net
income and $.09 in earnings per share for the nine month period ended
September 30, 1995.
In addition to reflecting the impact of the above transactions, net
income for the twelve month period also includes a write-down of
$54.2 million recorded by the Company in the fourth quarter of 1994.
This write-down was recorded to reflect the net realizable value of the
Company's information services segment's community banking and check
processing operations. The net income impact from the gain on the sale of
telephone properties and the write-downs resulted in a decrease of $.08 in
earnings per share for the twelve month period ended September 30, 1995.
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
recorded a 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 ended September 30, 1994.
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Income Taxes
Income tax expense increased $3.8 million or 8%, increased $16.9 million
or 12% and decreased $29.9 million or 14% for the three, nine and twelve month
periods, respectively. The increase in the three and nine month periods
primarily resulted from an increase in taxable income. The decrease in
income tax expense for the twelve month period was primarily due to the
tax benefit resulting from the write-down of the information services
operations recorded in December 1994. In addition, income tax expense for the
twelve months ended September 30, 1994 does not reflect a tax benefit from the
write-down of the product distribution operations, since utilization of the
benefit is not certain.
Net Income Applicable to Common Shares
Net income applicable to common shares increased $5.6 million or 7%,
$34.3 million or 15% and $9.3 million or 3% for the three, nine and twelve
month periods, respectively. Primary earnings per common share for the three,
nine and twelve month periods ended September 30, 1995 also increased 7%, 15%
and 3%, respectively over the same periods in 1994. The nine month period for
1995 includes the effect of the gain on the sale of certain telephone
properties and the additional write-down of the information services segment's
check processing operations. The net income impact from these transactions
resulted in an increase of $.09 in earnings per share. The twelve month
period for 1995 also includes the effect of the December 1994 write-down of
the information services segment's community banking and check processing
operations. Excluding these transactions, net income would have increased
$17.6 million and $24.7 million or 8% and earnings per share would have also
increased 8% for both the nine 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.
Average Common Shares Outstanding
The average number of common shares outstanding increased slightly in
each of the three, nine and twelve month periods ended September 30, 1995.
The increases in all periods were primarily due to additional shares issued
under stock option plans. The increase in the twelve month period also
reflects the issuance of approximately 0.3 million shares in November 1994
for the acquisition of MDT.
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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 15.
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the quarter for
which this report is filed.
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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,
and Chief Accounting Officer
November 13, 1995
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ALLTEL CORPORATION
FORM 10-Q
INDEX OF EXHIBITS
Form 10-Q Sequential
Exhibit No. Description Page No.
(19) Interim Report to Stockholders and
Notes to Consolidated Financial
Statements for the periods ended
September 30, 1995 16-24
(27) Financial Data Schedule
for the nine months ended
September 30, 1995 25
15
EXHIBIT 19
<TABLE>
<CAPTION>
HIGHLIGHTS (Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended Sept. 30, Nine Months Ended Sept. 30, Twelve Months Ended Sept. 30,
% Increase % Increase % Increase
1995 1994 (Decrease) 1995 1994 (Decrease) 1995 1994 (Decrease)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues and sales $785,779 $738,880 6 $2,335,870 $2,170,202 8 $3,093,344 $2,818,445 10
Net income $ 85,312 $ 79,728 7 $ 262,039 $ 227,801 15 $ 305,991 $ 296,858 3
Primary earnings per average
common share outstanding $.45 $.42 7 $1.38 $1.20 15 $1.61 $1.56 3
Excluding gain on disposal or
exchange of assets, write-down
of assets and other:
Net income $ 85,312 $ 79,728 7 $ 245,432 $ 227,801 8 $ 321,607 $ 296,879 8
Earnings per share $.45 $.42 7 $1.29 $1.20 8 $1.69 $1.56 8
Average common shares
including equivalents 189,988,000 189,330,000 - 89,982,000 189,449,000 - 189,826,000 189,419,000 -
Annual dividend rate
per common share $.96 $.88 9
Total assets $5,069,978 $4,617,635 10
Telephone access lines 1,666,526 1,632,592 2
Cellular customers 575,952 396,717 45
</TABLE>
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<TABLE>
<CAPTION>
BUSINESS SEGMENTS (Unaudited)
(Dollars in thousands)
Three Months Ended Sept. 30, Nine Months Ended Sept. 30, Twelve Months Ended Sept. 30,
% Increase % Increase % Increase
1995 1994 (Decrease) 1995 1994 (Decrease) 1995 1994 (Decrease)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES AND SALES:
Telephone $297,196 $293,752 1 $ 902,267 $ 883,411 2 $1,197,133 $1,161,215 3
Information services 228,715 211,612 8 674,932 626,827 8 909,605 818,710 11
Product distribution 120,296 119,360 1 350,002 327,386 7 459,259 415,840 10
Cellular 103,627 75,835 37 295,712 204,352 45 378,706 257,782 47
Other operations 35,945 38,321 (6) 112,957 128,226 (12) 148,641 164,898 (10)
Total $785,779 $738,880 6 $2,335,870 $2,170,202 8 $3,093,344 $2,818,445 10
OPERATING INCOME:
Telephone $100,466 $ 99,098 1 $ 315,036 $ 301,052 5 $ 414,191 $ 398,452 4
Information services 34,510 33,287 4 91,095 97,013 (6) 123,847 127,470 (3)
Product distribution 7,590 6,997 8 21,933 18,151 21 27,702 21,750 27
Cellular 35,534 26,256 35 90,030 63,205 42 111,480 77,069 45
Other operations 2,087 4,075 (49) 6,210 13,053 (52) 8,427 16,492 (49)
Corporate expenses (4,832) (3,585) 35 (17,628) (14,161) 24 (23,418) (23,016) 2
Total $175,355 $166,128 6 $ 506,676 $ 478,313 6 $ 662,229 $ 618,217 7
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Nine Months Twelve Months
Ended Sept. 30, Ended Sept. 30, Ended Sept. 30,
1995 1994 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C>
REVENUES AND SALES $785,779 $738,880 $2,335,870 $2,170,202 $3,093,344 $2,818,445
COSTS AND EXPENSES:
Cost of products sold 117,528 113,263 347,423 311,867 457,634 392,725
Operations 335,609 315,897 1,018,089 962,694 1,347,646 1,260,921
Maintenance 37,929 39,362 112,080 112,742 150,586 148,689
Depreciation and amortization 102,397 86,878 299,428 254,382 407,009 332,266
Taxes, other than income taxes 16,961 17,352 52,174 50,204 68,240 65,627
Total costs and expenses 610,424 572,752 1,829,194 1,691,889 2,431,115 2,200,228
OPERATING INCOME 175,355 166,128 506,676 478,313 662,229 618,217
Other income, net (909) (2,851) 489 (7,191) 1,616 (6,954)
Interest expense (37,159) (35,365) (112,187) (101,360) (147,947) (130,176)
Gain on disposal or exchange of assets,
write-down of assets and other -- -- 25,927 -- (28,230) 27,390
Income before income taxes 137,287 127,912 420,905 369,762 487,668 508,477
Federal and state income taxes 51,975 48,184 158,866 141,961 181,677 211,619
Net income 85,312 79,728 262,039 227,801 305,991 296,858
Preferred dividends 287 304 883 931 1,184 1,313
Net income applicable to common shares $ 85,025 $ 79,424 $ 261,156 $ 226,870 $ 304,807 $ 295,545
PRIMARY EARNINGS PER SHARE $.45 $.42 $1.38 $1.20 $1.61 $1.56
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
Nine Months Twelve Months
Ended Sept. 30, Ended Sept. 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $498,921 $376,970 $702,828 $ 556,751
CASH USED (PROVIDED) IN INVESTING:
Additions to property, plant and equipment 409,316 414,600 590,828 548,025
Purchase of subsidiaries,
net of cash acquired -- -- -- 443,000
Sale of property (95,944) -- (95,944) --
Additions to investments 18,326 75 27,715 2,501
Other, net 50,853 35,816 64,664 66,988
Net cash used in investing activities 382,551 450,491 587,263 1,060,514
CASH USED (PROVIDED) IN FINANCING:
Dividends on preferred and common stock 136,571 124,490 182,117 166,308
Reductions in long-term debt 180,792 108,461 220,115 153,065
Long-term debt issued (198,603) (314,793) (288,693) (815,277)
Purchase of common stock -- 9,503 1,429 9,503
Common stock issued (11,049) (6,825) (21,074) (7,333)
Other, net 647 (11,073) 12,158 (8,052)
Net cash used (provided) in
financing activities 108,358 (90,237) 106,052 (501,786)
Increase (decrease) in cash
and short-term investments 8,012 16,716 9,513 (1,977)
CASH AND SHORT-TERM INVESTMENTS:
Beginning of period 26,098 7,881 24,597 26,574
End of period $ 34,110 $ 24,597 $ 34,110 $ 24,597
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS (Unaudited)
ASSETS (Dollars in thousands)
Sept. 30, Dec. 31, Sept. 30,
1995 1994 1994
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and short-term investments $ 34,110 $ 26,098 $ 24,597
Accounts receivable 543,559 533,244 501,334
Materials and supplies 28,611 24,348 27,330
Inventories 89,227 94,458 91,176
Prepaid expenses 18,963 14,579 16,357
Total current assets 714,470 692,727 660,794
Investments 534,604 332,748 358,957
Excess of cost over equity
in subsidiary companies 504,193 494,861 492,061
PROPERTY, PLANT AND EQUIPMENT:
Telephone 3,841,452 3,756,894 3,684,133
Information services 449,874 380,182 350,396
Cellular 432,241 324,258 273,350
Other 29,331 25,011 24,159
Under construction 175,518 210,496 211,306
Total property, plant and equipment 4,928,416 4,696,841 4,543,344
Less accumulated depreciation 1,888,743 1,733,610 1,683,874
Net property, plant and equipment 3,039,673 2,963,231 2,859,470
OTHER ASSETS 277,038 230,311 246,353
TOTAL ASSETS $5,069,978 $4,713,878 $4,617,635
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
Sept. 30, Dec. 31, Sept. 30,
1995 1994 1994
<S> <C> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 37,834 $ 51,676 $ 49,528
Accounts payable 217,239 259,723 225,163
Advance payments and customers' deposits 70,343 57,042 58,075
Accrued taxes 50,618 21,171 54,060
Accrued dividends 45,210 45,158 41,182
Other current liabilities 138,150 170,845 154,292
Total current liabilities 559,394 605,615 582,300
DEFERRED CREDITS:
Investment tax 24,874 31,077 33,252
Income taxes 514,640 385,469 381,280
Total deferred credits 539,514 416,546 414,532
Long-term debt 1,852,936 1,846,150 1,801,061
Other liabilities 249,128 212,369 174,290
Preferred stock, redeemable 7,249 7,829 7,834
SHAREHOLDERS' EQUITY:
Preferred stock 9,285 9,320 9,340
Common stock 189,024 187,981 187,599
Additional capital 349,636 339,436 331,616
Unrealized holding gain on investments 184,165 84,275 103,393
Retained earnings 1,129,647 1,004,357 1,005,670
Total shareholders' equity 1,861,757 1,625,369 1,637,618
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $5,069,978 $4,713,878 $4,617,635
</TABLE>
21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL STATEMENT PRESENTATION:
The consolidated financial statements at September 30, 1995 and 1994 and
for the three, nine and twelve month periods then ended are unaudited and
reflect all adjustments (consisting only of normal recurring adjustments)
which are, in the opinion of management, necessary for a fair
presentation of the financial position and operating results for the
interim periods.
2. ACCOUNTING POLICIES-EVALUATION OF GOODWILL:
The Company continually evaluates the existence of goodwill impairment
on the basis of whether the goodwill is fully recoverable from projected,
undiscounted net cash flows of the related business unit.
3. PENDING SALE OF CERTAIN TELEPHONE PROPERTIES:
In November 1994, the Company signed definitive agreements to sell
certain telephone properties serving approximately 114,000 access lines
in Arizona, California, Nevada, New Mexico, Oregon, Tennessee, Utah and
West Virginia to Citizens Utilities in exchange for approximately $290
million in cash, assumed debt and 3,600 access lines in Pennsylvania. In
addition, the Company signed a long-term agreement to provide information
processing services for the telephone operations of Citizens Utilities.
The sale of the telephone properties in Oregon and West Virginia was
completed at the end of the second quarter and resulted in a pre-tax
gain of $30.9 million. The sale of the remaining telephone properties
will be completed on a state-by-state basis as necessary regulatory
approvals are obtained. The Company expects to complete the sale of the
remaining properties by the end of the first quarter of 1996, assuming
the required regulatory approvals are received and that all other
conditions and requirements are satisfied. Once completed, this
transaction will result in the Company's telephone operating
subsidiaries serving approximately 1.6 million access lines
in 14 states. Net proceeds from this transaction will be used to reduce
the Company's outstanding long-term debt. The operations of the
telephone properties to be disposed of represented approximately 3
percent of the Company's revenues and approximately 4 percent, 6 percent
and 7 percent of the Company's net income for the three, nine and
twelve month periods ended September 30, 1995, respectively.
22
<PAGE>
To ALLTEL STOCKHOLDERS:
ALLTEL Corporation recently announced its financial results for the period
ended Sept. 30, 1995.
Third quarter earnings were 45 cents per share, up 7 percent from 42
cents a year ago. Net income advanced 7 percent to $85,312,000 from the
$79,728,000 reported in the third quarter last year, while revenues and sales
were $785,779,000, up 6 percent from $738,880,000 in the corresponding quarter
of 1994.
Earnings per share for the nine months ended Sept. 30, 1995 were
$1.38, up 15 percent from $1.20 a year ago. Net income was $262,039,000, an
increase of 15 percent over $227,801,000 last year on revenues and sales of
$2,335,870,000, up 8 percent from $2,170,202,000 in the corresponding period
last year. Nine-month results include a net after-tax gain of $17 million or 9
cents per share, resulting from the sale of ALLTEL's West Virginia and Oregon
telephone operations in the second quarter. Excluding the gain, earnings per
share were $1.29, up 8 percent from the corresponding period last year, and net
income from operations was also up 8 percent at $245,432,000.
The Company's third quarter operating results reflect the efforts of
our long-term repositioning efforts in telephone and cellular.
While telephone's performance and internal growth remain solid,
results reflect the sale of the Company's West Virginia and Oregon telephone
properties.
Cellular once again generated strong gains in revenue and operating
income despite a net reduction in customers and revenues due to the exchange
and combination of certain properties with BellSouth. This repositioning
strengthens ALLTEL's competitive position in the Carolinas.
Information services reported positive comparisons in revenues and
operating income in spite of continued soft sales in outsourcing and software.
Improved results reflect cost-control initiatives implemented earlier this
year.
23
<PAGE>
ALLTEL Corporation's board of directors voted to increase the regular
quarterly common dividend from 24 cents to 26 cents per share.
The new indicated annual dividend rate will be $1.04 per common
share, an increase of 8 cents or 8 percent over the previous rate. This is
the 35th consecutive annual dividend increase since the Company's founding.
The 26 cent dividend is payable on Jan. 3, 1996 to stockholders of record as
of Dec. 8, 1995.
Dividends were also declared on all series of the Company's preferred
stock. Preferred dividends are payable on Dec. 15, 1995 to stockholders of
record as of Nov. 22, 1995.
/s/ Joe Ford
Joe T. Ford,
Chairman, President and Chief Executive Officer
October 26, 1995
24
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE THIRD
QUARTER REPORT TO SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH REPORT.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 34,110
<SECURITIES> 0
<RECEIVABLES> 543,559
<ALLOWANCES> 0
<INVENTORY> 89,227
<CURRENT-ASSETS> 714,470
<PP&E> 4,928,416
<DEPRECIATION> 1,888,743
<TOTAL-ASSETS> 5,069,978
<CURRENT-LIABILITIES> 559,394
<BONDS> 1,852,936
<COMMON> 189,024
7,249
9,285
<OTHER-SE> 1,663,448
<TOTAL-LIABILITY-AND-EQUITY> 5,069,978
<SALES> 0
<TOTAL-REVENUES> 2,335,870
<CGS> 347,423
<TOTAL-COSTS> 1,829,194
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 112,187
<INCOME-PRETAX> 420,905
<INCOME-TAX> 158,866
<INCOME-CONTINUING> 262,039
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 262,039
<EPS-PRIMARY> 1.38
<EPS-DILUTED> 0
</TABLE>
