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, 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 1-4996-2
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, 1995:
188,787,000
The Exhibit Index is located at sequential page 14 .
<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, 1995, 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, 1995 and 1994.
Consolidated Balance Sheets - March 31, 1995 and 1994 and December
31, 1994.
Consolidated Statements of Cash Flows - for the three and twelve
months ended March 31, 1995 and 1994.
<PAGE>
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
The Company's total capital structure was $3.615 billion at
March 31, 1995, reflecting 47% common and preferred equity and 53% debt. This
compares to a capital structure of $3.531 billion at December 31, 1994,
reflecting 46% common and preferred equity and 54% debt. The Company's financial
strength continues to provide it the flexibility to make necessary and desirable
capital expenditures.
Capital expenditures were $140.1 million in the first quarter of 1995
compared to $109.6 million in the first quarter of 1994. During the first
quarter of 1995, the Company financed the majority of its capital expenditures
through the internal generation of funds. Capital expenditures are forecast at
$525.6 million for 1995 and 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
new equipment to provide telecommunications services. In addition, capital
expenditures were incurred for expansion into new cellular and information
services markets, and to upgrade existing cellular network facilities.
The Company has a $500 million revolving credit agreement. Total borrowings
outstanding under this agreement were $159.1 million at March 31, 1995, compared
to $132.0 million at December 31, 1994 and $262.1 million at March 31, 1994.
Borrowings under this agreement in 1995 were used primarily for general
corporate requirements. In April 1994, the Company issued $250 million of
7.25% debentures to reduce borrowings under its revolving credit agreement. The
decrease in borrowings under the revolving credit agreement for the twelve
month period ended March 31, 1995 reflects the issuance of the $250 million
debentures, partially offset by additional borrowings incurred for expansion of
cellular investments and for other general corporate requirements.
3
<PAGE>
Long-term debt issued in the three month period of 1995 consisted of
additional borrowings under the revolving credit agreement. 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 $250 million debentures along with the issuance of $90 million of notes by
the subsidiaries account for the majority of long-term debt issued during the
twelve months ended March 31, 1995.
RESULTS OF OPERATIONS
Telephone Operations
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. In
connection with this acquisition, the Company reorganized its telephone
headquarters staff and consolidated its five telephone regions into three.
Telephone operations revenues and sales increased $8.2 million or 3% and
$118.5 million or 11% for the three and twelve months ended March 31, 1995,
respectively. Telephone operating income increased $6.3 million or 6% and $35.1
million or 9% for the three and twelve month periods, respectively. The
acquisition of the GTE Georgia properties accounted for $109.8 million of the
increase in revenues and sales and $41.7 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 $5.8 million or 6% and $63.1 million or 19%
in the three and twelve month periods, respectively. The increase in revenues
for the three month period resulted primarily from increases in customer access
lines and growth in custom calling feature revenues. The acquisition of the GTE
Georgia properties accounted for $45.7 million of the increase in local service
revenues for the twelve month period. Growth in customer access lines and growth
in customer calling feature revenues also contributed to the increase in
revenues for the twelve month period. There have been no local rate increases
granted to any of the Company's telephone operating subsidiaries during 1995,
and management does not anticipate filing for any local rate increases during
the remainder of 1995.
4
<PAGE>
Network access and long-distance revenues increased $1.4 million or 1% and
$40.6 million or 7% for the three and twelve month periods, respectively. The
increase in three month period was primarily due to higher volumes of access
connections, while the acquisition of the GTE Georgia properties accounted for
$54.5 million of the increase in revenues for the twelve month period. The
increases in revenues for both periods were partially offset by the impact of
changing from an average schedule to cost method of settling interstate access
revenues by two of the Company's telephone operating subsidiaries and other
regulatory commission actions designed to reduce earnings levels in Ohio
(effective May 1, 1994) and California (effective January 1, 1995). These
regulatory actions resulted in net decreases in revenues of approximately $6.5
million and $25.7 million for the three and twelve month periods ended March 31,
1995, respectively.
Miscellaneous revenues increased $1.0 million or 3% and $14.8 million or
11% for the three and twelve month periods, respectively. The increase in the
three month period was primarily due to increases in direct sales of telephone
equipment, rental revenues, and sales of telephone equipment maintenance and
protection plans. The acquisition of the GTE Georgia properties accounted for
$9.6 million of the increase in miscellaneous revenues for the twelve month
period. Increases in direct sales of telephone equipment, intrastate billing and
collection revenues, directory advertising and sales of telephone equipment
maintenance and protection plans also contributed to the increase in revenues
for the twelve month period.
Total telephone operating expenses increased $1.9 million or 1% and $83.4
million or 12% for the three and twelve month periods, respectively. The
acquisition of the GTE Georgia properties accounted for $68.1 million of the
increase in operating expenses for the twelve month period. Operating expenses
for all periods increased due to increased expense for maintenance and repair of
cable, digital electronic switching and circuit equipment, an increase in cost
of products sold related to sales of telephone equipment and maintenance and
protection plans and increased depreciation expense. These increases were
partially offset by lower maintenance expense related to electro-mechanical
switching equipment and a reduction in accounting, financial and human resource
management expense resulting from the reorganization and consolidation of the
Company's telephone operations.
5
<PAGE>
In November 1994, the Company signed definitive agreements to sell certain
telephone properties serving approximately 113,000 access lines in Arizona,
California, Nevada, New Mexico, Oregon, Tennessee, Utah and West Virginia to
Citizens Utilities Company in exchange for approximately $290 million in cash,
assumed debt and 3,600 access lines in Pennsylvania. This sale will be completed
on a state-by-state basis as necessary regulatory approvals are obtained and is
expected to be completed by the end of 1995. The telephone properties to be
disposed of represent approximately 10 percent of the telephone operations
revenues for both periods and approximately 9 percent and 11 percent of the
operating income for the three and twelve month periods ended March 31, 1995,
respectively.
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's management periodically reviews these criteria to
ensure the continuing application of SFAS 71 is appropriate.
The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of". This new standard,
effective for calendar year 1996 financial statements, requires impairment
losses on long-lived assets to be recognized when an asset's book value exceeds
its expected future cash flows (undiscounted). The new standard also imposes
stricter criteria for retention of regulatory-created assets by requiring that
such assets be probable for future recovery at each balance sheet date. The
impact of implementing this standard, given the regulatory uncertainties
discussed above, is not known at this time.
Information Services
Revenues and sales for the information services segment reflect increases
of $18.5 million or 9% and $160.3 million or 22% for the three 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 taking place in the financial services industry and the slowdown
of mortgage refinancing activities. As a result, operating income decreased
$1.8 million or 6% for the three month period and increased $11.1 million or 9%
for the twelve month period, respectively.
6
<PAGE>
Information services revenues and sales increased in both periods primarily
due to increases in the telecommunications portion of its outsourcing business.
Additional services provided under existing facilities management contracts,
additional software maintenance revenues, an increase in the number of loans
processed, and increased usage of specialized programming service offerings
also contributed to the increase in revenues and sales for all periods. The
increase for the twelve month period also reflects the expansion of this
segment's international and healthcare operations. Healthcare services revenues
and sales increased primarily due to the acquisition of TDS Healthcare Systems
Corporation ("TDS") in October 1993. 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, and by a reduction in revenues collected for early termination
of facilities management contracts. As a result of a decrease in mortgage
refinancing activity, fees earned related to the processing and servicing of
mortgage loans also decreased in both periods.
The decrease in operating income for the three month period primarily
resulted from lost operations due to contract terminations, an increase in
operating costs including depreciation and amortization expense, increases in
corporate operating expenses, and the reduction in fees collected on the early
termination of facilities management contracts. The increase in operating income
for the twelve month period reflects the increase in revenues and sales
previously discussed, partially offset by additional costs incurred to procure
and support new international service contracts, a reduction in fees collected
on the early termination of facilities management contracts, lost operations
from contract terminations and an increase in depreciation and amortization
expense. Depreciation and amortization expense increased in both periods
primarily due to the acquisition of additional data processing equipment and due
to an increase in amortization of internally generated software.
As a result of the declining contributions from this segment's check
processing and community banking operations, the Company recorded a write-down
in the carrying value of these operations in December 1994. This write-down
resulted in an after-tax charge of approximately $32 million and is included in
the twelve months ended March 31, 1995.
Product Distribution Operations
The product distribution segment continued to show improved operating
results. Revenues and sales reflect increases of $10.9 million or 11% and $67.0
million or 18% for the three and twelve month
7
<PAGE>
periods, respectively. Operating income increased $1.7 million or 32% and $8.0
million or 45% for the three and twelve month periods, respectively.
The increases in revenues and sales for both periods was primarily due to
growth in sales of telecommunications and data products to new and existing
customers, including sales to affiliates. Sales of electrical wire and cable
products also increased in all periods reflecting increased copper prices and a
slightly higher demand for these products.
Operating income increased in both periods primarily because of the
increases in revenues and sales noted above. Increased profit margins of
electrical wire and cable products resulting from the increase in copper prices
also contributed to the growth in operating income in both periods. These
increases were partially offset by an increase in selling related expenses.
Cellular Operations
Cellular operations provided solid operating results and contributed
significantly to the Company's overall earnings growth. Revenues and sales
reflect increases of $28.6 million or 48% and $111.0 million or 54% for the
three and twelve month periods, respectively. Operating income increased $6.3
million or 42% and $38.9 million or 75% for the three and twelve month periods,
respectively. During the twelve month period ended March 31, 1995, subscriber
growth remained strong as the number of cellular customers grew to 520,480 from
322,447, an increase of 198,033 customers or 61%.
Cellular operations revenues and sales increased in all periods primarily
due to the significant growth in its customer base. The acquisition of new
cellular properties and increased ownership interest in existing cellular
properties also contributed to the growth in revenues and sales for the twelve
month period. 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 $5.1 million or 11% for the
three month period and increased $49.9 million or 46% for the twelve month
period, respectively. Operating income decreased $2.3 million or 49% for the
three month period and increased $1.5 million or 13% for the twelve month
period, respectively.
8
<PAGE>
Revenues and sales for other operations decreased in the three month
period primarily due to a change in accounting related to the publication of
directories. Concurrent with the purchase of the independent telephone
directory operations of GTE Directories Corporation ("GTE Directories")
effective October 1993, the Company began recognizing all revenues and expenses
related to a published directory in the month of publication, instead of
recognizing the revenues and expenses ratably over a twelve month period. As a
result of this change, operating revenues for the three and twelve month
periods ended March 31, 1994 include approximately $8.1 million and $32.2
million, respectively, of additional revenues related to directories accounted
for under the previous method. The decrease in revenues and sales for the three
month period was partially offset by the publication of additional directories
in 1995. The increase in revenues and sales for the twelve month period was
primarily due to the growth in publishing operations attributable to the
purchase of the GTE Directories' operations discussed above. As a result of
this acquisition, the number of directories published during the twelve months
ended March 31, 1995 was 364 compared to only 147 directories published during
the same period in 1994. The increase in revenues and sales for the twelve
month period was partially offset by the impact on operating revenues due to
the change in recognizing revenues and expenses discussed above.
Operating income decreased in the three month period primarily due to the
decrease in revenues and sales previously noted. Operating income for the twelve
month period increased primarily due to the increase in revenues and sales,
partially offset by increases in directory services expense, sales and marketing
expenses, depreciation and other operating expenses related to the rapid growth
and expansion of the directory publishing operations.
Corporate Expenses
Corporate operating expenses decreased $0.9 million or 16% and $4.5 million
or 19% for the three month and twelve month periods, respectively. The decrease
for the three month period was primarily due to a decrease in employee benefit
costs including deferred compensation costs, partially offset by an increase in
operating expenses including costs related to building operations. The decrease
in the twelve month period was primarily due to a decrease in deferred
compensation costs and other employee benefit costs.
9
<PAGE>
Other Income, Net
Other income, net increased $2.9 million or 223% for the three month
period and decreased $2.8 million or 699% for the twelve month period,
respectively. The increase in the three month period was primarily due to an
increase in equity income recognized on investments in cellular limited
partnerships and an increase in capitalized interest costs related to long-term
construction projects. These increases were partially offset by an increase in
the minority interest in earnings of the Company's cellular operations by
others. The decrease in the twelve month period reflects the increase in
minority interest in earnings of the Company's cellular properties by others
and the amortization of telephone plant acquisition adjustments related to the
GTE Georgia properties acquisition. These decreases were partially offset by an
increase in equity income recognized on investments in cellular limited
partnerships and an increase in capitalized interest costs related to
construction. The increase in equity income for both the three and twelve month
periods reflects the improved operating results of those partnership interests
not managed by the Company.
Interest Expense
Interest expense increased $5.6 million or 18% and $35.4 million or 33% for
the three and twelve month periods, respectively. The increase in interest
expense in all periods is primarily due to an increase in long-term debt
outstanding. As previously discussed, the increase in long-term debt outstanding
reflects the issuance of $90 million of notes by subsidiaries in the fourth
quarter of 1994, the issuance of $250 million debentures in April 1994 to reduce
borrowings under the Company's revolving credit agreement, and the issuance of
$400 million debentures in November 1993 to finance the GTE Georgia properties
acquisition.
Gain on Exchange of Assets, Write-down of Assets and Other
In the fourth quarter of 1994, the Company recorded a write-down of $54.2
million to reflect the net realizable value of its information services
segment's community banking and check processing operations. This write-down
resulted in a decrease of $.17 in earnings per share for the twelve month period
ended March 31, 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
10
<PAGE>
addition, the Company also recorded a partial write-down 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
March 31, 1994.
Income Taxes
Income tax expense increased $1.7 million or 4% for the three month period
and decreased $28.5 million or 15% for the twelve month period, respectively.
The increase in the three month period 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 March 31, 1994 does not reflect a tax
benefit from the write-down of product distribution operations, since
utilization of the benefit is not certain.
Net Income Applicable to Common Shares
Net income applicable to common shares increased $6.7 million or 9% and
$8.0 million or 3% for the three and twelve month periods, respectively. Primary
earnings per common share for the three and twelve month periods ended March 31,
1995 increased 8% and 2%, respectively over the same periods in 1994. The twelve
month period for 1995 includes the effect of the write-down of the information
services segment's community banking and check processing operations. This
write-down decreased net income by approximately $32 million or $.17 per share.
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 for the
three month period and increased 1% for the twelve month period ended March 31,
1995. The slight increase for the three month period reflects the issuance of
approximately 0.3 million shares in connection with the acquisition of a
subsidiary. The increase in the twelve month period was primarily due to the
issuance of approximately 2.0 million shares in October 1993 for the acquisition
of TDS.
11
<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 14.
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the quarter for
which this report is filed.
12
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,
and Chief Accounting Officer
May 12, 1995
13
ALLTEL CORPORATION
FORM 10-Q
INDEX OF EXHIBITS
Form 10-Q Sequential
Exhibit No. Description Page No.
(10)(k)(1) Amendment No. 1 to ALLTEL Corporation
Pension Plan (January 1, 1994 Restatement) 23-25
(20) Interim Report to Stockholders
for the periods ended March 31, 1995 15-22
(27) Financial Data Schedule
for the three months ended March 31, 1995 26
14
<PAGE>
EXHIBIT 20
<TABLE>
<CAPTION>
HIGHLIGHTS (UNAUDITED)
(Dollars in thousands, except per share amounts)
Three Months Ended March 31, Twelve Months Ended March 31,
% Increase % Increase
1995 1994 (Decrease) 1995 1994 (Decrease)
<S> <C> <C> <C> <C> <C> <C>
Revenues and sales $763,615 $702,424 9 $2,988,867 $2,482,062 20
Net income $ 78,623 $ 71,776 9 $ 278,490 $ 270,747 3
Primary earnings per average
common share outstanding $.41 $.38 8 $1.46 $1.43 2
Excluding net gain on exchange of assets
write-down of assets and other:
Net income $ 78,623 $ 71,886 9 $ 310,713 $ 270,768 15
Earnings per share $.41 $.38 8 $1.63 $1.43 14
Average common shares
including equivalents 190,009,000 189,560,000 - 189,530,000 188,273,000 1
Annual dividend rate per common share $.96 $.88 9
Total assets $4,828,974 $4,389,790 10
Telephone access lines 1,663,758 1,595,876 4
Cellular customers 520,480 322,447 61
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
BUSINESS SEGMENTS (UNAUDITED)
(Dollars in thousands)
Three Months Ended March 31, Twelve Months Ended March 31,
% Increase % Increase
1995 1994 (Decrease) 1995 1994 (Decrease)
<S> <C> <C> <C> <C> <C> <C>
REVENUES AND SALES:
Telephone $302,526 $294,292 3 $1,186,511 $1,068,011 11
Information services 218,313 199,792 9 880,021 719,706 22
Product distribution 113,490 102,635 11 447,498 380,496 18
Cellular 88,719 60,074 48 315,991 204,947 54
Other operations 40,567 45,631 (11) 158,846 108,902 46
Total $763,615 $702,424 9 $2,988,867 $2,482,062 20
OPERATING INCOME:
Telephone $107,898 $101,559 6 $ 406,546 $ 371,428 9
Information services 27,545 29,329 (6) 127,981 116,887 9
Product distribution 7,135 5,389 32 25,666 17,675 45
Cellular 21,464 15,124 42 90,995 52,133 75
Other operations 2,368 4,649 (49) 12,989 11,468 13
Corporate expenses (4,872) (5,773) (16) (19,050) (23,509) (19)
Total $161,538 $150,277 7 $ 645,127 $ 546,082 18
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands, except per share amounts)
Three Months Twelve Months
Ended March 31, Ended March 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
REVENUES AND SALES $763,615 $702,424 $2,988,867 $2,482,062
COSTS AND EXPENSES:
Cost of products sold 115,069 97,406 439,741 348,272
Operations 335,790 319,633 1,308,408 1,099,600
Maintenance 37,158 35,242 153,164 134,983
Depreciation and amortization 96,474 82,928 375,509 291,558
Taxes, other than income taxes 17,586 16,938 66,918 61,567
Total costs and expenses 602,077 552,147 2,343,740 1,935,980
OPERATING INCOME 161,538 150,277 645,127 546,082
Other income, net 1,576 (1,282) (3,206) (401)
Interest expense (37,132) (31,485) (142,767) (107,333)
Income before gain on exchange of
assets, write-down of assets,
other, and income taxes 125,982 117,510 499,154 438,348
Gain on exchange of assets,
write-down of assets and other -- -- (54,157) 27,390
Income before income taxes 125,982 117,510 444,997 465,738
Federal and state income taxes 47,359 45,624 166,507 194,991
Net income 78,623 71,886 278,490 270,747
Preferred dividends 317 310 1,239 1,482
Net income applicable to common shares $ 78,306 $ 71,576 $ 277,251 $ 269,265
PRIMARY EARNINGS PER SHARE: $.41 $.38 $1.46 $1.43
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
Three Months Twelve Months
Ended March 31, Ended March 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $168,126 $125,536 $623,467 $541,560
CASH USED IN INVESTING:
Additions to property, plant and equipment 140,149 109,593 626,668 449,522
Purchase of subsidiaries, net of cash acquired -- -- -- 443,000
Additions to investments 9,097 (3,580) 22,141 1,230
Other, net 10,792 5,160 55,259 76,808
Net cash used in investing activities 160,038 111,173 704,068 970,560
CASH USED (PROVIDED) IN FINANCING:
Dividends on preferred and common stock 45,502 41,773 173,765 158,596
Reductions in long-term debt 12,858 3,119 157,523 81,840
Long-term debt issued (27,122) (53,448) (378,557) (663,390)
Common stock issued (5,980) (2,251) (20,579) (5,809)
Other, net 3 (86) 11,459 3,726
Net cash used (provided) in financing activities 25,261 (10,893) (56,389) (425,037)
(Decrease) increase in cash and short-term investments (17,173) 25,256 (24,212) (3,963)
CASH AND SHORT-TERM INVESTMENTS:
Beginning of period 26,098 7,881 33,137 37,100
End of period $ 8,925 $ 33,137 $ 8,925 $ 33,137
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
ASSETS (Dollars in thousands)
March 31, Dec. 31, March 31,
1995 1994 1994
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and short-term investments $ 8,925 $ 26,098 $ 33,137
Accounts receivable 528,430 533,244 410,775
Materials and supplies 29,232 24,348 26,995
Inventories 90,145 94,458 74,938
Prepaid expenses 24,218 14,579 17,316
Total current assets 680,950 692,727 563,161
Investments 395,830 332,748 381,375
Excess of cost over equity
in subsidiary companies 489,741 494,861 498,179
PROPERTY, PLANT AND EQUIPMENT:
Telephone 3,783,468 3,756,894 3,566,190
Information services 393,811 380,182 306,035
Cellular 371,285 324,258 231,775
Other 30,086 25,011 22,377
Under construction 238,794 210,496 211,096
Total property, plant and equipment 4,817,444 4,696,841 4,337,473
Less accumulated depreciation 1,792,925 1,733,610 1,623,740
Net property, plant and equipment 3,024,519 2,963,231 2,713,733
OTHER ASSETS 237,934 230,311 233,342
TOTAL ASSETS $4,828,974 $4,713,878 $4,389,790
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, Dec. 31, March 31,
1995 1994 1994
<S> <C> <C> <C>
Current maturities of long-term debt $ 46,705 $ 51,676 $ 48,644
Accounts payable 228,466 259,723 184,323
Advance payments and customers' deposits 63,164 57,042 62,739
Accrued taxes 50,047 21,171 66,674
Accrued dividends 45,252 45,158 41,701
Other current liabilities 149,528 170,845 181,327
Total current liabilities 583,162 605,615 585,408
DEFERRED CREDITS:
Investment tax 29,376 31,077 36,810
Income taxes 420,962 385,469 376,691
Total deferred credits 450,338 416,546 413,501
Long-term debt 1,865,445 1,846,150 1,640,433
Other liabilities 226,835 212,369 155,435
Preferred stock, redeemable 7,748 7,829 8,576
SHAREHOLDERS' EQUITY
Preferred stock 9,295 9,320 9,385
Common stock 188,787 187,981 187,761
Additional capital 344,715 339,436 336,115
Unrealized holding gain on investments 115,352 84,275 120,423
Retained earnings 1,037,297 1,004,357 932,753
Total shareholders' equity 1,695,446 1,625,369 1,586,437
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,828,974 $4,713,878 $4,389,790
</TABLE>
20
<PAGE>
To ALLTEL Stockholders:
ALLTEL Corporation recently announced its financial results for the quarter
ended March 31, 1995.
First quarter earnings were 41 cents per share, compared with 38 cents
per share a year ago, an 8 percent increase. Net income for the first quarter of
1995 was $78,623,000, compared with $71,886,000 in the first quarter of 1994, an
increase of 9 percent. Revenues and sales were $763,615,000, up 9 percent from
$702,424,000 in the corresponding quarter of 1994.
Earnings per share for the 12 months ended March 31, 1995 were $1.46,
compared with $1.43 a year ago, while net income was $278,490,000, compared with
$270,747,000 in the year-ago period. Revenues and sales were $2,988,867,000,
compared with $2,482,062,000 in 1994.
The rolling 12-month results reflect the 1994 fourth quarter after-tax
write-down of $32 million on certain assets of the Company's information
services subsidiary. Excluding the write-down, net income from operations for
the rolling 12 months increased 15 percent to $310,713,000, while earnings per
share increased 14 percent to $1.63.
Telephone, which produced solid increases again this quarter, continues
to benefit from steady access line growth and focused cost control efforts.
As expected, information services results reflect the effect of
continued consolidation in the financial industry, as well as the uneven flow of
new contracts. The booking of new software sales was particularly light during
the first quarter, which affected margins.
Cellular again generated strong growth in customers. While this has
positive implications for future earnings, selling costs associated with
aggressive marketing efforts had a softening effect on margins in the first
quarter.
ALLTEL Mobile Reaches 500,000 Customers
ALLTEL Mobile recently achieved a milestone, becoming one of
approximately 15 cellular carriers in the United States to reach the
half-millionth customer mark. Since ALLTEL Mobile began providing cellular
service in 1985, its growth has been exceptional. In 1994 alone, ALLTEL Mobile
added more than 190,000 new customers - a number that exceeded the company's
total number of customers in its first eight years of business.
21
<PAGE>
1995 Stockholders Meeting Results
At ALLTEL's annual stockholders meeting held April 20 in Little Rock, Arkansas,
Lawrence L. Gellerstedt III, Emon A. Mahony Jr. and Ronald Townsend were elected
directors to the class whose term will expire in 1998. Stockholders also
re-elected Arthur Andersen LLP independent auditors for the 1995 fiscal year.
In addition, George C. McConnaughey and Philip F. Searle retired from
the Company's Board of Directors.
Searle joined ALLTEL's board in 1961. McConnaughey had been a director
since 1966. In their three decades of service, the stockholders benefited
greatly from their business counsel.
ALLTEL Names New Board Members
Michael D. Andreas, vice chairman and executive vice president of Archer Daniels
Midland Company in Decatur, Illinois, and Josie Natori, president of The Natori
Company of New York City, have been elected to ALLTEL's Board of Directors.
Andreas, 46, also serves on the board of directors of Toepfer
International of Hamburg, Germany, and Golden Peanut Company of Atlanta.
Natori, 47, serves on the boards of a number of organizations,
including Manhattanville College, the Educational Foundation of Fashion
Industries, the Philippine American Foundation, the Dreyfus Third Century
Foundation and Calyx & Corolla.
Board Declares Regular Quarterly Dividends
ALLTEL Corporation's Board of Directors declared regular quarterly dividends on
the Company's common stock. The 24 cent dividend is payable July 3, 1995 to
stockholders of record as of June 12, 1995.
Regular quarterly dividends were also declared on all series of the
Company's preferred stock. Preferred dividends are payable on June 15, 1995 to
stockholders of record as of May 26, 1995.
/s/ Joe Ford
Joe T. Ford,
Chairman, President and Chief Executive Officer
April 20, 1995
22
<PAGE>
AMENDMENT NO. 1
TO
ALLTEL CORPORATION PENSION PLAN
(January 1, 1994 Restatement)
WHEREAS, ALLTEL Corporation (the "Company") amended and restated
the ALLTEL Corporation Pension Plan (the "Plan"), effective January 1, 1994; and
WHEREAS, the Company desires further to amend the Plan;
NOW THEREFORE, BE IT RESOLVED, that the Company hereby amends
Appendix T to Section 13.19 of the Plan, effective as of March 5, 1995, by
adding a new Article VII to provide as follows:
ARTICLE VII CESSATION OF ACCRUALS
1. Application - The provisions of this Article VII are effective
beginning as of March 5, 1995, and shall apply to:
(i) each Employee who, on or after March 5, 1995, is
represented by the Georgia IBEW Local 84 (a "Georgia IBEW
Employee");
(ii) each Employee who, on or after March 5, 1995, is
represented by the Communications Workers of America Local 3270,
3271, 3272, or 3275 (a "CWA Employee");
(iii) each Employee who, on March 5, 1995, would be a Georgia
IBEW Employee or a CWA Employee but for a Change in Employment
Status, as defined in subsection (d) of Section 1.01 of the Plan,
that occurred prior to March 5, 1995; and
(iv) any other Employee who on or after March 5, 1995, would
accrue any benefits under this Appendix T (including, but not
limited to, Attachment I to Appendix T) but for the provisions of
this Article VII.
2. Cessation of Benefit Accruals -
(a) For periods on and after March 5, 1995, there shall be no benefit
accruals under this Appendix T (including, but not limited to, Attachment I
to Appendix T) with respect to an Employee described in Section 1 of this
Article VII, including, but not limited to, any crediting of Accredited
Service under this Appendix T (including, but not limited to, Attachment I
to Appendix T) with respect to an Employee described in Section 1 of this
Article VII.
23
<PAGE>
(b) Notwithstanding the provisions of paragraph (a) of this Section 2:
(i) The Average Annual Compensation of an Employee described
in clause (i), clause (ii), or clause (iii) of Section 1 of this
Article VII shall take into account amounts earned on and after
March 5, 1995, or, with respect to an Employee described in clause
(iii) of Section 1 of this Article VII, after the date of his Change
in Employment Status that would be included in the Employee's
Average Annual Compensation, if any, but for the provisions of this
Article VII or subsection (d) of Section 1.01 of the Plan.
Furthermore, the "GTE Compensation" (as defined in Paragraph 1.g. of
Attachment I to Appendix T) of an Employee described in clause (i),
clause (ii), or clause (iii) of Section 1 of this Article VII shall
take into account amounts earned on and after March 5, 1995, or,
with respect to an Employee described in clause (iii) of Section 1
of this Article VII, after the date of his Change in Employment
Status that would be included in the Employee's "GTE Compensation"
(as defined in Paragraph 1.g. of Attachment I to Appendix T), if
any, but for the provisions of this Article VII or subsection (d) of
Section 1.01 of the Plan.
(ii) An Employee described in clause (i), clause (ii), or
clause (iii) of Section 1 of this Article VII who is a "Bargaining
Transfer Employee" (as defined in the first paragraph of this
Appendix T) shall be credited with Accredited Service under this
Appendix T for periods on and after March 5, 1995, or, with respect
to such an Employee who is described in clause (iii) of Section 1 of
this Article VII, after the date of his Change in Employment Status,
solely for eligibility purposes under Sections 3, 4, and 5 of
Article IV of this Appendix T, eligibility purposes under paragraphs
(b) and (c) of Section 1 of Article V of this Appendix T, and, if
applicable, eligibility purposes under Paragraph 4.a.(3) of
Attachment I to Appendix T. An Employee described in clause (i),
clause (ii), or clause (iii) of Section 1 of this Article VII who is
not a "Bargaining Transfer Employee" (as defined in the first
paragraph of this Appendix T) shall be treated as if his employment
with the employers described in Section 2 of Article III of this
Appendix T had terminated as of March 4, 1995, for purposes of
paragraph (c) of Section 1 of Article IV of this Appendix T, and
shall be credited with Accredited Service under this Appendix T for
periods on and after March 5, 1995, or, with respect to such an
Employee described in clause (iii) of Section 1 of this Article VII,
after the date of his Change in Employment Status, solely for
eligibility purposes under Sections 3, 4, and 5 of Article IV of
this Appendix T, and eligibility purposes under paragraph (b) of
Section 1 of Article V of this Appendix T.
-2-
24
<PAGE>
3. Determination of Accredited Service and Benefit Service -
The sum of the Accredited Service and Benefit Service with which an
Employee described in clause (i), clause (ii), or clause (iii) of Section 1
of this Article VII is credited for the Plan Year that includes March 5,
1995 or, for an Employee described in clause (iii) of Section 1 of this
Article VII, the date of his Change in Employment Status, shall not be less
than or more than the Accredited Service with which the Employee would have
been credited for such Plan Year but for the provisions of this Article VII
or subsection (d) of Section 1.01 of the Plan. In such regard, there shall
first be determined the Accredited Service of an Employee described in
clause (i), clause (ii), or clause (iii) of Section 1 of this Article VII
for such Plan Year in accordance with the second paragraph of Section 6 of
Article III of this Appendix T, and there shall then be determined the
Benefit Service of such an Employee for such Plan Year in accordance with
subparagraph (ii) of paragraph (1) of subsection (d) of Section 1.37 of the
Plan; provided, however, that such Benefit Service shall be rounded up or
down, as applicable, if necessary to meet the limitation contained in the
immediately preceding sentence.
4. Change in Employment Status - Effective beginning as of March 5, 1995,
the provisions of subsection (a) of Section 1.01 of the Plan shall apply to
each Employee described in clause (i), clause (ii), or clause (iv) of
Section 1 of this Article VII. The provisions of paragraph (2) of
subsection (d) of Section 1.01 of the Plan shall apply to each Employee
described in clause (i) or (ii) of Section 1 of this Article VII as if he
had had a Change in Employment Status pursuant to paragraph (1) of
subsection (d) of Section 1.01 of the Plan as of March 5, 1995, except that
in applying the last sentence of the first paragraph of paragraph (2) of
subsection (d) of Section 1.01 of the Plan, the "GTE Benefit" shall be
computed taking into account Section 2 of this Article VII. In applying the
last sentence of the first paragraph of paragraph (2) of subsection (d) of
Section 1.01 of the Plan to an Employee described in clause (iii) of
Section 1 of this Article VII, the "GTE Benefit" shall be computed taking
into account Section 2 of this Article VII.
5. Overriding Provisions - The provisions of this Article VII shall
apply notwithstanding any other provision of the Plan to the contrary.
IN WITNESS WHEREOF, the Company, by its duly authorized
officer, has caused this Amendment to be executed on this day of , 1995.
ALLTEL CORPORATION
By: /s/ John L. Comparin
Title: Vice President - Human Resources
25
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FIRST QUARTER REPORT TO SHAREHOLDERS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 8,925
<SECURITIES> 0
<RECEIVABLES> 528,430
<ALLOWANCES> 0
<INVENTORY> 90,145
<CURRENT-ASSETS> 680,950
<PP&E> 4,817,444
<DEPRECIATION> 1,792,925
<TOTAL-ASSETS> 4,828,974
<CURRENT-LIABILITIES> 583,162
<BONDS> 1,865,445
<COMMON> 188,787
7,748
9,925
<OTHER-SE> 1,497,364
<TOTAL-LIABILITY-AND-EQUITY> 4,828,974
<SALES> 0
<TOTAL-REVENUES> 763,615
<CGS> 115,069
<TOTAL-COSTS> 602,077
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,132
<INCOME-PRETAX> 125,982
<INCOME-TAX> 47,359
<INCOME-CONTINUING> 78,623
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 78,623
<EPS-PRIMARY> .41
<EPS-DILUTED> 0
</TABLE>
