SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K/A
AMENDMENT NO. 2 TO ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock New York and Pacific
$2.06 No Par Cumulative Convertible
Preferred Stock New York and Pacific
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (X)
Aggregate market value of voting stock held by non-affiliates as of
January 31, 1995 - $ 5,341,217,327
Common shares outstanding, January 31, 1995 - 188,236,734
DOCUMENTS INCORPORATED BY REFERENCE
Document Incorporated Into
Portions of the annual report to stockholders
for the year ended December 31, 1994 Parts I, II and IV
Proxy statement for the 1995 annual meeting
of stockholders Part III
<PAGE>
SIGNATURE
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its 1994 Annual Report on Form 10-K
as set forth in the pages attached hereto;
(list all such items, financial statements, exhibits
or other portions amended)
Part I
Item 1 Business.
Part III
Item 11 Executive Compensation
Item 13 Certain Relationships and Related Transactions
Signature Page From Annual Report on Form 10-K
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
ALLTEL CORPORATION
(Registrant)
/s/ Dennis J. Ferra
Dennis J. Ferra
Senior Vice-President - Accounting and Administration
August 9, 1995
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
THE COMPANY
GENERAL
ALLTEL Corporation ("ALLTEL" or the "Company"), incorporated in June 1960 under
the laws of Ohio as Mid-Continent Telephone Corporation, changed its name to
ALLTEL Corporation in October 1983. During 1990, the Company changed its state
of incorporation to Delaware. ALLTEL is a diversified telecommunications and
information services company. The Company provides local and network access
services to customers throughout 22 states. The Company also owns subsidiaries
or investments that provide cellular telephone, wide-area paging and fiber
optic-based long-distance telephone service. Information processing management
services and advanced applications software are provided to the financial,
healthcare and telecommunications industries by the Company's information
services subsidiaries. Telecommunications products and electronic and electric
wire and cable are warehoused and sold by the Company's distribution
subsidiaries. In addition, the Company publishes telephone directories and
provides cable television service.
ACQUISITIONS
In November 1994, the Company completed its acquisition of Medical Data
Technology, Inc. ("MDT"). MDT provides information processing services to 14
hospitals in the northeastern United States utilizing comprehensive application
software developed by ALLTEL's healthcare information services subsidiary.
Effective November 1, 1993, the Company and GTE Corporation completed an
exchange of telephone service areas in several states. ALLTEL exchanged
approximately 95,000 access lines in Illinois, Indiana and Michigan and $443
million in cash for GTE's Georgia telephone operations, which serve
approximately 320,000 access lines.
In October 1993, the Company completed its merger with TDS Healthcare Systems
Corporation ("TDS"). TDS is a leading provider of comprehensive patient care
and healthcare enterprise information systems serving more than 200 hospitals
in the United States, Canada and Europe.
In October 1993, ALLTEL Publishing Corporation ("ALLTEL Publishing") completed
its purchase of GTE Directories Service Corporation's ("GTE Directories")
independent publishing business which includes contracts with more than 125
independent telephone companies across the country.
During 1993, ALLTEL Mobile Communications, Inc. ("ALLTEL Mobile") acquired a
100% interest in one Georgia Rural Service Area ("RSA") which has a population
of approximately 145,000. In addition, ALLTEL Mobile acquired interests
in two other Georgia RSAs and increased its ownership in one Texas RSA and one
Mississippi RSA.
In January 1993, ALLTEL Mobile acquired an additional 20% interest in the
Ft. Smith, Arkansas Metropolitan Statistical Area ("MSA"). This transaction
increased ALLTEL Mobile's interest in the Ft. Smith MSA to 80%.
1
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
THE COMPANY (continued)
ACQUISITIONS (continued)
On December 31, 1992, ALLTEL Mobile acquired a 60% interest and a 90% interest
in the Ft. Smith, Arkansas and Fayetteville, Arkansas MSAs, respectively.
In December 1992, the Company acquired SLT Communications, Inc. ("SLT"). SLT
serves approximately 49,000 telephone customers primarily in suburban Houston.
It also has approximately 328,000 cellular "pops", including 2.34% ownership
in the Houston, Galveston and Beaumont, Texas MSA, a 1% interest in the
Little Rock, Arkansas MSA, and has interest in four Texas RSA markets. In
addition, SLT serves approximately 6,900 cable television subscribers and owns
one-third of Metropolitan Houston Paging Services, one of the largest paging
networks in Texas.
During 1992, ALLTEL Mobile increased its ownership to 100% in the Springfield,
Missouri and Charlotte, North Carolina MSAs, to 80% in the Savannah,
Georgia MSA and to 64% in the Little Rock, Arkansas MSA.
In February 1992, the Company acquired Computer Power, Inc. ("CPI"), the
nation's largest provider of software and processing services to the mortgage
industry. CPI has a comprehensive set of proprietary software systems which
includes the Mortgage Servicing Package, Residential Loan Inventory Control
Package, the Residential Loan Production Control Package, and a number of
related systems as well as consulting, training, portfolio conversion and other
services.
During 1992, ALLTEL Mobile purchased an additional 42% interest in the
Savannah, Georgia, MSA, increasing its total interest to 80%, purchased
operating control of the Ft. Smith and Fayetteville, Arkansas, MSAs, as well as
additional interests in three Arkansas and Oklahoma RSAs, one Missouri RSA, and
three Alabama RSAs.
In 1991, the Company acquired Missouri Telephone Company. Missouri Telephone
Company serves approximately 20,000 customer access lines and 2,600 cable
television customers in Missouri. It also has 320,000 cellular "pops" including
48% ownership in the Springfield, Mo. MSA cellular market where together with
ALLTEL Mobile, the Company now owns a 98% interest.
In early 1991, Systematics Information Services, Inc. ("Systematics") (now
known as ALLTEL Information Services, Inc.) acquired Systems Limited, an
international banking software firm headquartered in Hong Kong. Systems Limited
is a provider of wholesale banking software.
In January 1991, Systematics (now known as ALLTEL Information Services, Inc.)
completed its acquisition of the cellular telephone billing and information
system software of C-TEC Corporation ("C-TEC"), an independent
telecommunications company.
2
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
THE COMPANY (continued)
ACQUISITIONS (continued)
In October 1990, Systematics (now known as ALLTEL Information Services, Inc.)
acquired Computer Dynamics, Inc.("CDI"), a mortgage data processor that
services 200,000 loans for financial institutions in six states. During 1993,
these mortgages were transferred to the CPI system.
In July 1990, Systematics (now known as ALLTEL Information Services, Inc.)
acquired HORIZON Financial Software Corporation ("Horizon") of Orlando,
Florida. HORIZON develops and markets software for mid-sized community
financial institutions using the IBM AS/400 computer technology.
In May 1990, the Company acquired Systematics (now known as ALLTEL Information
Services, Inc.) headquartered in Little Rock, Arkansas. Systematics is one of
the nation's leading providers of information processing management services
and advanced application software for the financial services, healthcare and
telecommunications industries.
In 1990, ALLTEL Mobile acquired the remaining 55% of the Aiken,
South Carolina / Augusta, Georgia system, where ALLTEL Mobile already held a
45% interest thereby increasing its ownership to 100%.
DISPOSITIONS
In 1992, the Company sold substantially all of the assets of Ocean
Technology, Inc. ("OTI"). OTI designed, developed, and manufactured command,
control, and communication systems primarily for military use. In
September 1991, the Company completed the sale of all of its natural gas
operations. During 1990, the Company sold Denro, Inc., a manufacturing
subsidiary.
MANAGEMENT
The Company's headquarters and regional offices staff supervise, coordinate and
assist subsidiaries in management activities, investor relations, acquisitions,
corporate planning, insurance, and technical research. They also coordinate the
financing program for the entire corporate system.
EMPLOYEES
At January 31, 1995, the Company had 16,363 employees. Some of the employees of
the Company's telephone subsidiaries are part of collective bargaining units.
The Company maintains good relations with all employee groups.
INDUSTRY SEGMENTS
Financial information about industry segments is included in the Company's 1994
Annual Report to Stockholders, which is incorporated herein by reference.
3
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
TELEPHONE OPERATIONS
LOCAL SERVICE
General
The Company's telephone operating subsidiaries provide local service to over
1,643,000 customer lines through 667 exchanges. The telephone operating
subsidiaries also offer facilities for private line, data transmission and
other communications services. In addition, these subsidiaries sell and lease
end user telephone equipment (terminal equipment) as well as maintenance and
protection plans for customer-owned equipment.
Regulation
The Company's telephone operating subsidiaries are subject to regulation by
the utility commissions of the states in which they operate. These commissions
have jurisdiction over various matters including local and intrastate toll
rates, conditions of service, securities issues, depreciation rates, the
encumbering or disposition of public utility properties and the prescription
of a uniform system of accounts. There were no local rate increases granted to
any of the Company's telephone operating subsidiaries in 1994, nor are there
any rate requests currently pending before regulatory commissions. During 1994,
telephone operations were affected by certain regulatory commission orders
designed to reduce earnings levels. These orders did not materially impact the
results of operations of the Company.
Competition
The Company's telephone subsidiaries provide local telephone service in their
service areas without significant competition from other regulated carriers.
However, the Company may experience future competition in its territories from
alternative telecommunication systems which include facilities constructed by
large end users or by interexchange carriers, satellite transmission services,
cellular communications, cable television systems, radio-based personal
communications services, competitive access providers and other systems which
are capable of completely or partially bypassing the local telephone
facilities. The method of that competition would primarily consist of providing
alternative local services which may be based on price or availability of
additional services. This type of competition is becoming more prevalent in
urban areas with a large concentrated customer base, but has not materially
affected the Company's more rural territories to date.
As legislation and state regulation relax the regulatory environment for local
service and technology continues to advance, the Company likely will experience
additional competitive situations and opportunities in the future. The Company
cannot predict the specific effects of such competition on its business but is
intent on meeting and taking advantage of the various opportunities which
competition provides. The Company is addressing potential competition by
focusing on improved customer satisfaction, reducing its cost structure, and
becoming more efficient.
4
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
TELEPHONE OPERATIONS (continued)
LOCAL SERVICE (continued)
ALLTEL's subsidiaries are also competing for the sale and leasing of terminal
equipment to business and residential customers as well as for the installation
and maintenance of inside wire and terminal equipment. The method of
competition for the sale and leasing of terminal equipment and the installation
and the maintenance of inside wire relates primarily to price and the
availability of various alternatives in the customer premise equipment ("CPE")
market. The Company offers these services in order to be a full service
provider of telecommunication needs to its customers.
ACCESS SERVICES
General
The Company's customers have access to message and private line toll services
through the local exchanges of the Company's telephone operating subsidiaries.
Local exchanges provide toll service and network access for interexchange
telephone traffic to locations outside of the Company's service areas through
connections with other local exchange and interexchange carriers. These
connections permit communications from any telephone in the ALLTEL system to
nationwide locations and to points in most foreign countries.
Regulation
The Federal Communications Commission ("FCC") authorizes a rate-of-return
("ROR") that telephone companies may earn on interstate services they provide.
Effective January 1, 1991, the FCC replaced rate-of-return regulation with
price cap regulation for the Bell Operating Companies and GTE Corporation with
an optional election for all other companies not remaining in the National
Exchange Carrier Association ("NECA") Common Line and Traffic Sensitive Pools.
The FCC reduced the ROR from 12.0% to 11.25% for companies remaining under
ROR regulation. This 11.25% ROR continued through 1994. As of
December 31, 1994, certain of the Company's telephone operating subsidiaries
have exited the NECA traffic sensitive and end user tariffs.
Price cap regulation for holding companies, such as ALLTEL, requires all
affiliated operating telephone companies settling on a cost basis to choose
price cap regulation at the same time or all remain under ROR regulation
(with the exception of average schedule affiliates). Price cap regulation
allows for different earnings potential than ROR depending on the
"productivity offset" the company chooses. In addition, companies electing
price cap regulation may make adjustments for the rate of inflation and
exogenous (non-controllable) costs. Price cap regulation is designed
to allow greater pricing flexibility and includes the risk of earnings lower
than under ROR regulation. The FCC undertook a comprehensive review of the LEC
price cap plan in 1994. An order mandating any changes for price cap companies
is expected in early 1995. In 1992, the FCC initiated a rulemaking proceeding
(CC Docket No. 92-135) to address regulatory alternatives for mid-size and
small local exchange carriers. This proceeding resulted in a set of rules,
adopted in September of 1993, that provide for a non price cap form of
incentive regulation for which ALLTEL would be eligible.
5
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
TELEPHONE OPERATIONS (continued)
ACCESS SERVICES (continued)
Regulation (continued)
Certain states in which the Company operates, either through legislative
changes or by commission actions, have adopted various forms of alternatives
to rate-of-return regulation. However, most of these plans have been adopted
for the Bell Operating Companies and have not been widely used by commissions
in dealing with other telephone companies including the Company's telephone
operating subsidiaries.
To date, the Company has not elected price cap (incentive) regulation, but is
monitoring the activity of the FCC and the states in which the Company
operates telephone companies and will determine the appropriate action required
as these activities develop.
Interexchange carrier charges
The FCC establishes access procedures by which interexchange carriers
reimburse the Company's telephone operating subsidiaries for the use of their
local networks to complete long-distance calls. With the exception of ALLTEL
Carolina, Inc., ALLTEL Florida, Inc., ALLTEL Georgia Communications Corp.,
ALLTEL Pennsylvania, Inc., ALLTEL New York, Inc., ALLTEL Tennessee, Inc.,
Georgia ALLTEL Telecom Inc., Oklahoma ALLTEL, Inc. and Sugar Land Telephone
Company, all of the Company's telephone operating subsidiaries participated
in NECA's interstate traffic sensitive tariff and settlements processes during
1994. All companies, with the exception of ALLTEL Georgia Communications Corp.
and Georgia ALLTEL Telecom Inc., also participated in NECA"s common line
tariffs and pools during 1994. For those companies remaining in the NECA
common line and traffic sensitive pools, participation in NECA's revenue
distribution process was entirely based on actual costs. Intrastate interlata
services are reimbursed to the Company's telephone operating subsidiaries
under arrangements ordered by state commissions. These arrangements are based
on access and can be on a bill-and-keep or pooled basis. The Company's
telephone operating subsidiaries receive reimbursement for intrastate intralata
services through access or toll based revenue arrangements, once again on
either a bill-and-keep or pooled basis.
Equal access
The Company's telephone operating subsidiaries offer equal access to nearly 94%
of their customers. The availability of equal access provides customers with
the opportunity to choose the long-distance company they want to use. The
Company's telephone operating subsidiaries then program their equipment to
allow the customer to use the selected long-distance company by dialing 1, the
area code, and a seven-digit telephone number.
6
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
TELEPHONE OPERATIONS (continued)
ACCESS SERVICES (continued)
Billing and collection
Interstate billing and collection services were previously detariffed as
ordered by the FCC. The Company's telephone operating subsidiaries continue to
provide interstate billing and collection services for interexchange carriers
through various agreements and also provide intrastate billing and collection
services under state tariff arrangements or under contract where these services
are detariffed.
Competition
Long-distance services are provided by several competing companies. One aspect
of competition is the potential bypass of the local exchange carrier's
facilities by large volume toll users. Certain states in which the Company's
telephone subsidiaries operate allow various forms of intralata competition for
select functions or complete intralata service. There has been no significant
measurable effect on the operations of the Company's telephone subsidiaries as
a result of this competition.
The long-range effect of competition on the provision and cost of
telecommunications services and equipment will depend on technological
advances, regulatory actions at both the state and federal levels, court
decisions, and possible future federal and state legislation. The continued
growth of competition may have an effect on the cost of telephone service to
customers and on the telephone revenues of the Company's telephone operating
subsidiaries. The FCC has ordered that the larger (Tier 1) local exchange
carriers provide switched and special transport interconnection as well as
tandem signaling to competitive providers. Local exchange carriers are no
longer required to provide physical collocation but are required to tariff
virtual interconnection arrangements.
OTHER
In November 1994, the Company signed definitive agreements to sell certain
telephone properties serving approximately 111,000 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. Once completed, this transaction will result in the Company's
telephone operating subsidiaries serving approximately 1.5 million access
lines in 14 states.
7
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
INFORMATION SERVICES
GENERAL
Effective February 15, 1995, the Company changed the names of its principal
information services subsidiaries. Systematics Information Services, Inc. was
changed to ALLTEL Information Services, Inc., Systematics Financial
Services, Inc. was changed to ALLTEL Financial Information Services, Inc.,
Computer Power, Inc. was changed to ALLTEL Mortgage Information Services Inc.,
Systematics Healthcare Services, Inc. was changed to ALLTEL Healthcare
Information Services, Inc. and Systematics Telecommunications Services, Inc.
was changed to ALLTEL Telecom Information Services, Inc.
ALLTEL Information Services, Inc. ("ALLTEL Information Services") provides a
wide range of information processing services to the financial services,
healthcare and telecommunications industries through information processing
centers that it staffs, equips and operates. Information processing contracts
are generally for a multi-year period. ALLTEL Financial Information
Services Inc.'s software and services have been developed and improved
continuously over the last 26 years and are designed to fulfill substantially
all of the retail information processing and management information
requirements of financial institutions. ALLTEL Information Services also
markets software worldwide to financial services, healthcare and
telecommunications companies operating their own information processing
departments.
ALLTEL Healthcare Information Services, Inc. is primarily engaged in the
development and marketing of comprehensive patient centered healthcare
enterprise information systems to medium to large healthcare companies
throughout North America and Europe. These systems are designed to enhance the
quality of patient care, control processing costs and provide substantially
all of the information requirements of its users. Under typical arrangements
with hospitals, software is licensed under perpetual license arrangements.
Software and hardware maintenance are normally contracted for periods of five
to seven years. Contracts to install software normally range over periods from
twelve to eighteen months. Other services provided include training,
consulting and data processing services.
ALLTEL Mortgage Information Services, Inc. provides data processing and
related computer software and systems to financial institutions originating
and/or servicing single family mortgage loans. This subsidiary's software
products and processing services, combined with its team of mortgage bankers,
are intended to offer a cost-effective alternative to the extensive technical
support staff and the enlarged group of mortgage bankers which would otherwise
have to be assembled in-house by each customer. ALLTEL Mortgage Information
Services, Inc.'s on-line systems automate processing functions required in the
origination of mortgage loans, the management of such loans while in inventory
before they are sold in the secondary market, and their subsequent servicing.
8
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
INFORMATION SERVICES (continued)
CUSTOMERS
ALLTEL Financial Information Services, Inc.'s primary market for its financial
products and services are the nation's commercial banks and savings
institutions and financial institutions outside the United States, primarily
in Europe and Asia. Financial software and services are also marketed to
mortgage service companies, credit unions and healthcare companies. ALLTEL
Telecom Information Services, Inc.'s primary market for its telecommunications
products and services is the top 150 telephone companies and top 50 cellular
companies in the United States. ALLTEL Healthcare Information Services, Inc.'s
primary market for its healthcare software products are hospitals with 400 or
more beds. Many of these customers are large, state funded hospitals which
include a significant number of university hospitals and other large healthcare
providers.
ALLTEL Mortgage Information Services, Inc. provides its services primarily to
financial institutions originating and/or servicing single family mortgage
loans that have sold the loans in the secondary market while continuing to
service the loans. These institutions which include more than one-half of the
top 100 servicers of residential mortgages are located throughout the United
States. In total, nearly 15 million mortgage loans representing over $1.1
trillion are processed by its software.
COMPETITION
ALLTEL Financial Information Services, Inc.'s competition primarily comes from
"in-house" bank information processing departments and other companies engaged
in active competition for financial institution outsourcing contracts.
Numerous large financial institutions provide information processing for
smaller institutions in their respective geographic areas, along with other
companies that perform such services for small institutions. There are also
other companies that provide information processing services to the
telecommunications industry. Competition in the healthcare industry primarily
comes from other companies that provide comprehensive integrated hospital
information systems and from companies which offer solutions for individual
departments within the respective healthcare enterprises.
ALLTEL Mortgage Information Services, Inc.'s competition comes from "in-house"
information processing departments and from other companies that offer
information processing services to the mortgage banking industry. This
subsidiary competes in its business by providing a high level of service and
support.
The information services subsidiaries substantially rely upon and vigorously
enforce contract and trade secret laws and internal non-disclosure safeguards
to protect the proprietary nature of their computer software.
9
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
INFORMATION SERVICES (continued)
REGULATION AND EXAMINATION
Both ALLTEL Financial Information Services, Inc. and ALLTEL Mortgage
Information Services, Inc. are regulated by the federal agencies that have
supervisory authority over banking, thrift, and credit union operations.
ALLTEL Financial Information Services, Inc. is also classified as one of
twelve national vendors that, as a result of their market share, process a
significant portion of the financial industry assets. These industry leaders
are also examined by the federal Financial Institutions Examination Council
on an ongoing basis. The information services subsidiaries' management
practices, policies, procedures, standards, and overall financial condition
are components of these reviews. In addition to these corporate examinations,
the information services subsidiaries' individual processing sites are
examined, as if they were departments of their respective clients, by federal
and state regulators, as well as the clients' internal audit departments and
their independent auditing firms. The same standards of performance are applied
to those information processing centers as are applied to the client financial
institutions. Reports of the information services subsidiaries' data center
performance are furnished to the Board of Directors of ALLTEL Information
Services and to the Board of Directors of the examined client. The supervisory
agencies include applicable state banking departments, the Federal Deposit
Insurance Corporation, the Office of Thrift Supervision, the Office of the
Comptroller of the Currency, the Board of Governors of the Federal Reserve
System, and the National Credit Union Administration. The information services
subsidiaries' processing contracts include a commitment to install all
necessary changes in its computer software that are required by changes in
regulations.
ALLTEL Healthcare Information Services, Inc.'s operations are not specifically
regulated by any federal or state healthcare agency. However, its software must
meet all federal and state reporting requirements of its customers, including
Medicare, Medicaid and other state sponsored programs.
ALLTEL Mortgage Information Services, Inc. operates transmitters at the
network's information processing facility hub and operates very small aperture
technology ("VSAT") earth stations at numerous customer locations. Prior to
initiation, construction or operation of the transmitters used in a VSAT
satellite network, operators of these transmitters are required by the
Communications Act of 1934 to be authorized by the FCC. The FCC grants licenses
toVSAT operators for a predetermined number of earth stations that may be
placed at unspecified locations in the domestic United States. ALLTEL Mortgage
Information Services, Inc. holds five VSAT licenses issued by the FCC to
operate its domestic earth station satellite network, consisting of one 8.1m
license for its VSAT hub located in Jacksonville, Florida and four other VSAT
licenses ranging from 1.0m to 2.4m. Three of the VSAT licenses, including the
8.1m license, will expire in 1997, and the remaining two licenses will expire
in 2003.
10
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
INFORMATION SERVICES (continued)
PRODUCT DEVELOPMENT AND SUPPORT
In the past five years, the information services subsidiaries have spent
approximately $134.1 million ($37.7 million in 1994) on IBM mainframe COBOL
software design and development, or an average of 4.6% of their total
information services operating revenues in those years. One of the information
services subsidiaries has also begun to develop products which will be utilized
in a UNIX based environment. Changes in regulatory requirements of both state
and federal authorities, increasing competition, and the development of new
products and markets create the need continually to update or modify existing
software and systems offered to customers. The information services
subsidiaries intend to continue to maintain, improve, and expand the functions
and capabilities of their software products over the next several years.
OTHER
In 1994, ALLTEL Information Services signed a long-term agreement to provide
information processing services for the telephone operations of Citizens
Utilities Company. Under terms of the ten year contract, ALLTEL Information
Services will provide complete outsourcing services for Citizens' 750,000
telephone access lines, including generating Citizens' billing, customer
service information, engineering, and operational support.
In 1993, ALLTEL Information Services signed a long-term agreement with GTE
Telecommunications Products and Services Group to outsource GTE's cellular
billing operations.
Within three months of acquiring TDS, ALLTEL Information Services signed its
first hospital outsourcing contract with St. Joseph's Hospital in Parkersburg,
West Virginia. Under terms of the five-year contract, Systematics assumed all
healthcare information systems operations for this 375 bed hospital, including
providing on-site and remote management, software implementation and support,
hardware and network management and maintenance. TDS was merged with
Systematics Healthcare Services, Inc. during 1994. As discussed previously,
Systematics Healthcare Services, Inc.'s name was changed to ALLTEL Healthcare
Information Services, Inc. on February 15, 1995.
During 1991, ALLTEL Information Services signed a long-term facilities
management contract to handle all information processing activities for
ALLTEL's telephone and cellular operations.
PRODUCT DISTRIBUTION OPERATIONS
GENERAL
ALLTEL Supply, Inc. ("ALLTEL Supply"), with fourteen warehouses and thirteen
counter-sales showrooms across the United States, is a major distributor of
telecommunications equipment and materials. It supplies equipment to affiliated
and non-affiliated telephone companies, business systems suppliers, railroads,
governments, and retail and industrial companies. HWC, with ten warehouses
throughout the United States, is a major supplier of specialty wire and cable
products.
11
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
PRODUCT DISTRIBUTION OPERATIONS (continued)
COMPETITION
ALLTEL Supply and HWC (the "Distribution companies") experience substantial
competition throughout their sales territories from other distribution
companies and direct sales by manufacturers. Competition is based primarily on
quality, product availability, service, price, and technical assistance. The
Company is continually evaluating and implementing policies and strategies
which will meet customer expectations and position the Distribution companies
in the market as a quality customer-focused distributor. Examples of these
policies and strategies include the customer cable management program offered
by HWC and the "just-in-time" inventory trial conducted by ALLTEL Supply.
PRODUCTS
ALLTEL Supply offers more than 35,000 products for sale. In addition, ALLTEL
Supply inventories single and multi-line telephone sets, local area networks
("LANs"), switching equipment modules, interior cable, pole line hardware, and
various other telecommunications supply items.
HWC inventories more than 44,000 reels of specialty wire and cable. These
include shielded and unshielded power cables, flame resistant cables, and high
temperature precision engineered cables.
The Distribution companies have not encountered any material shortages or
delays in delivery of products from their suppliers.
CELLULAR OPERATIONS
GENERAL
ALLTEL Mobile provides cellular mobile telephone service in various major
markets throughout the United States. Cellular telephone service combines the
latest advances in telephone, radio and computer technology and is being
marketed to business executives, on-the-move professional people and individual
consumers. As cellular has become increasing more popular with broader segments
of the population, ALLTEL Mobile has opened several retail stores, in addition
to its traditional sales offices, where customers can purchase equipment and
learn more about wireless services.
BUSINESS
One potential of a cellular telephone market's investment is quantified by the
market's population times the percent of a company's ownership interest of the
cellular operation in that market ("pops"). ALLTEL Mobile owns a majority
interest in cellular operations in 12 MSAs and a minority interest in 13 other
MSAs. This represents 4.6 million cellular pops. ALLTEL Mobile also owns a
majority interest in cellular operations in 47 RSAs and a minority interest
in 23 other RSAs. This represents 3.3 million cellular pops.
ALLTEL Mobile operates systems in Charlotte, North Carolina; Little Rock,
Arkansas, Jackson, Mississippi; Montgomery, Alabama; Springfield, Missouri;
Ocala/Gainesville, Florida; Albany, Georgia; Aiken, South Carolina/Augusta,
Georgia; Savannah, Georgia; Ft. Smith, Arkansas; and Fayetteville, Arkansas.
12
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
CELLULAR OPERATIONS (continued)
BUSINESS (continued)
ALLTEL Mobile's subscriber fees are based upon the prevailing market and
competitive conditions which exist in each service area operated. The churn
rates experienced by ALLTEL Mobile are comparable with industry averages.
COMPETITION
Direct competition in the cellular telephone market consists of a non-wireline
carrier licensed to provide cellular telephone service in the same area.
Additionally, non-cellular mobile telephone service may be available in the
licensed area but is not currently considered a direct competitor within the
cellular market.
ALLTEL Mobile expects to face additional new competitors in its markets as a
result of the licensing of personal communication services ("PCS") providers
currently under way by the FCC. It is expected that these new competitors
will begin operations in 1996 or 1997. ALLTEL Mobile has and continues to take
actions in its markets to minimize the impact of these new competitors;
however, the long-term impacts of new competition can not be determined at this
time.
OTHER
In January 1995, ALLTEL Mobile and BellSouth Mobility signed a definitive
agreement involving cellular transactions impacting markets in five states.
The agreement, which is contingent on BellSouth's success in winning a PCS
license to provide services in North and South Carolina, would create a limited
partnership comprising cellular properties owned by the two companies in five
markets. The limited partnership would consist of BellSouth's interest in
cellular properties in Columbia, South Carolina (85.5%) and Florence, South
Carolina (100%) and ALLTEL Mobile's cellular interests in Columbia, South
Carolina (14.5%), Jackson, Mississippi and eight contiguous RSAs (49.9%),
Chattanooga, Tennessee (15.5%) and Pittsburgh, Pennsylvania (3.6%). ALLTEL
Mobile and BellSouth Mobility would share ownership of the partnership 53.5%
and 46.5%, respectively, with ALLTEL Mobile serving as managing partner. In
addition, under terms of the agreement, BellSouth Mobility will purchase 0.1%
of ALLTEL Mobile's ownership interest in its Jackson, Mississippi and eight
contiguous RSA cellular properties. ALLTEL Mobile will purchase BellSouth
Mobility's interest in six cellular properties in North and South Carolina.
Purchase of the properties is subject to rights of first refusal by BellSouth's
partners in these six cellular properties.
In November 1994, ALLTEL Mobile signed a definitive agreement to exchange
several of its cellular telephone properties for several cellular properties
owned by United States Cellular Corp. ("U.S. Cellular"). Under terms of the
agreement, ALLTEL Mobile will exchange certain assets in a West Virginia RSA
and an Oklahoma RSA for U.S. Cellular's certain assets in a Georgia RSA and a
North Carolina RSA. The acquired properties are contiguous to ALLTEL Mobile's
Albany, Georgia and Charlotte, North Carolina markets. In January 1995,
ALLTEL Mobile purchased U.S. Cellular's 20 percent interest in the
Fort Smith, Arkansas, MSA, thereby increasing ALLTEL Mobile's ownership
interest in the Fort Smith MSA to 100 percent.
13
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
PAGING
ALLTEL Mobile also operates wide-area computer-driven paging networks as a
complementary service to cellular telephones. In addition to paging networks
in Arkansas and Florida, the Company's acquisition of SLT in 1992 added a
one-third ownership in one of the largest paging networks in Texas, which
serves more than 177,000 subscribers.
DIRECTORY PUBLISHING
ALLTEL Publishing currently coordinates advertising, sales, printing, and
distribution for 362 telephone directories in 39 states.
In October 1993, ALLTEL Publishing completed its purchase of GTE Directories
independent publishing business, which includes contracts with more than 125
independent telephone companies across the country. Under terms of the
agreement, ALLTEL Publishing provides all directory publishing services
including contract management, production and marketing. As subcontractor,
GTE Directories provides directory sales and printing services through a
separate contract with ALLTEL Publishing.
CABLE TELEVISION SERVICE
The Company provides cable television service to more than 17,500 customers
in certain areas of the Navajo Indian Reservation (which covers an area
including parts of New Mexico, Arizona, and Utah), and to residents of Needles,
California, Springfield, Missouri, and central Texas. In total, thirty-three
cities and municipalities are served by the Company's cable television
operations. The number of broadcast channels provided by the Company in these
service areas range from 17 to 40 channels, with an average of 25 channels
provided per service area.
Neither the Company nor its cable television subsidiaries hold any spectrum or
other licenses issued by the FCC related to its cable television operations.
The Company's cable system receives signals by means of special antennae,
microwave relay systems and earth stations. The system amplifies such signals
and distributes programs to subscribers through a coaxial cable system. The
sources of the Company's cable television programming consist of the signals
received from national television networks, local and other independent
television stations that operate in or near to the Company's service areas,
satellite-delivered non-broadcast channels, and public service announcements.
Through contractual arrangements, the Company has obtained the authority to
re-transmit the program offerings supplied by these providers.
In November 1994, as part of its agreement to sell certain telephone
properties, the Company also signed definitive agreements to sell certain of
its cable television properties to Citizens Utilities Company. These cable
television properties serve approximately 7,000 customers in Arizona,
California, New Mexico and Utah.
NATURAL GAS DISTRIBUTION
In 1991, the Company disposed of all natural gas distribution operations.
14
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
MANUFACTURING
During 1992, the Company sold substantially all of the assets of OTI, which
designed, developed, manufactured and marketed products for use in military
command, control and communications systems. During 1990, the Company sold
Denro, Inc., which designs and manufactures microprocessor-based air traffic
control voice switching and control systems. After the sale of OTI, the
Company did not have any manufacturing operations.
INVESTMENTS
LDDS
ALLTEL owns approximately an 8% interest in LDDS Communications, Inc. ("LDDS"),
a publicly-held company. The investment was acquired in exchange for the
Company's previous interest in Advanced Telecommunications Corporation ("ATC"),
which was acquired by LDDS during 1992.
LDDS is one of the largest regional long-distance companies in the United
States and provides long-distance telecommunications services to customers
located in 41 states.
COMDIAL
ALLTEL owns approximately a 6% interest in Comdial Corporation, a producer of
quality telephone sets and key systems.
CHILLICOTHE
ALLTEL owns a 19.8% interest in Chillicothe Telephone Company, which serves
approximately 27,000 telephone lines in Ohio. Frederick G. Griech, President of
ALLTEL Telephone Services Corporation's Northeast Region, and Americo
Cornacchione, Senior Vice President-Accounting and Finance of ALLTEL Telephone
Services Corporation's Northeast Region, are members of Chillicothe's Board of
Directors.
OTHER
During 1991, the Company sold its stock in Luz International Limited, a
provider of solar energy, to an investment group in a private transaction.
During 1990, the Company completed the sale of its 14.5% interest in TPI
Enterprises, Inc., which had been a supplier of business communications
systems.
15
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part III
Item 11. Executive Compensation
COMPENSATION OF DIRECTORS
Directors who are not officers of ALLTEL receive $24,000 as an annual base fee
and $1,500 for each Board meeting and each Committee meeting attended. Each
Director who is not an officer of ALLTEL and serves as chairman of a Board
Committee receives an additional annual fee of $3,000. Directors may elect to
defer all or a part of their compensation under ALLTEL's deferred compensation
plan for directors.
With respect to amounts deferred under ALLTEL's deferred compensation plan for
directors, the director's deferred compensation account balance shall be
credited for earnings, if any, equal to the greater of (a) or (b) as follows:
(a) a percentage determined by dividing the cash dividends paid during the
current year for which the crediting, if any, is to be made on a share
of the Company's common stock by the book value for the year
immediately preceding such current year; or
(b) a percentage equal to the sum of (i) and (ii) as follows:
(i) the percentage increase in the closing sales price of one share
of the common stock of the Company on the last trading day of the
Company's fiscal year (Market Value) from the year immediately
preceding the current year for which the crediting, if any, is to
be made to the current year, except that if, the Market Value for
such immediate preceding year is less than the Market Value used
in calculating earnings for any preceding year, then the
foregoing percentage increase shall instead be the percentage
increase in the Market value from the prior highest Market Value
used in calculating earnings to the Market Value for the current
year; and
(ii) a percentage determined by dividing the cash dividends paid
during the current year for which the crediting, if any, is to be
made on one share of the Company's common stock by the Market
Value for the year immediately preceding the current year.
Under the Directors' Retirement Plan, a director who retires and has served
ALLTEL as a director for at least five years and is not then serving as a
corporate officer will receive an annual retirement payment based on the annual
base director fee in effect in the year of retirement. The annual retirement
payment equals 50% of that fee with an additional 5% for each year of service
in excess of five years of service to a maximum of 100% of the annual director
fee after 15 or more years of service. The retirement benefit is payable for a
retired director's life only. A director is considered to have "retired" if his
status as a director ceases for any reason other than his death or removal in
accordance with applicable law.
16
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part III
Item 11. Executive Compensation
COMPENSATION OF DIRECTORS (continued)
Under the 1994 Stock Option Plan for Nonemployee Directors
(the "Director Plan"), immediately following the 1994 Annual Meeting of
Stockholders on April 21, 1994, each nonemployee director received the initial
grant of an option to purchase 10,000 shares of Common Stock at an exercise
price of $26.25 per share (the closing market price of the Common Stock on
that date). Similarly, each nonemployee director who first becomes a director
after April 21, 1994, also automatically receives the initial grant of an
option to purchase 10,000 shares of Common Stock on the date the person first
becomes a nonemployee director at an exercise price equal to the closing market
price of the Common Stock on that date. The Director Plan also provides for the
automatic grant, following the conclusion of each subsequent annual meeting of
stockholders, of an option to purchase 2,000 shares of Common Stock to each
nonemployee director (other than a director who is first elected at such annual
meeting).
The option price of options granted under the Director Plan is the fair market
value of the Common Stock on the date the option is granted and is payable in
cash, already-owned Common Stock, or a combination of both. The options vest
and become exercisable on the day immediately preceding the next annual meeting
of stockholders following the date of grant or, if earlier, on the death or
disability of the holder or the occurrence of a "change of control."
A "change of control" shall be deemed to have occurred if:
(i) Any "person" as defined in Sections 13(d) and 14(d) of the
Exchange Act, other than ALLTEL, any of its subsidiaries, or any
employee benefit plan maintained by ALLTEL or any of its subsidiaries
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of 15% or more of the outstanding voting capital stock
of ALLTEL, unless prior thereto, the Continuing Directors (as defined
in the immediately following sentence) approve the transaction that
results in the person becoming the beneficial owner of 15% or more of
the outstanding voting capital stock of ALLTEL. "Continuing
Directors" means directors who were directors of ALLTEL at the
beginning of the 24-month period ending on the date the determination
is made or whose election, or nomination for election, by ALLTEL's
stockholders was approved by at least a majority of the directors who
are in office at the time of the election or nomination and who
either (1) were directors at the beginning of the period or (2) were
elected, or nominated for election, by at least a majority of the
directors who were in office at the time of the election or
nomination and were directors at the beginning of the period;
(ii) At any time Continuing Directors no longer constitute a majority of
the directors of ALLTEL;
(iii) The Board fixes a record date for determining stockholders entitled
to vote upon (1) a merger or consolidation of ALLTEL, statutory share
exchange, or other similar transaction with another corporation,
partnership, or other entity or enterprise in which either ALLTEL is
not the surviving or continuing corporation or Shares (defined as
shares of Common Stock, $1.00 par value, of ALLTEL) are to be
converted into or exchanged for cash, securities other than Shares,
or other property, (2) a sale or disposition of all or substantially
all of the assets of ALLTEL, or (3) the dissolution of ALLTEL; or
17
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part III
Item 11. Executive Compensation
COMPENSATION OF DIRECTORS (continued)
(iv) ALLTEL enters into an agreement with any person, entity, or enterprise
the consummation of which would result in the occurrence of an event
described in subparagraphs (i), (ii), or (iii) above. Notwithstanding
the foregoing, in no event shall a "Change in Control" be deemed to
have occurred with respect to a Participant if the Participant is part
of a purchasing group that consummates the Change in Control
transaction. A Participant shall be deemed "part of a purchasing
group" for purposes of the immediately preceding sentence if the
Participant is an equity participant in the purchasing company or
group other than as a result of passive ownership of less than five
percent of the voting capital stock or voting equity interests of the
purchasing company; or equity participation in the purchasing company
or group that is otherwise not significant, as determined prior to the
Change in Control by a majority of the Continuing Directors.
If a person ceases to be a nonemployee director, all vested options held by the
person continue to be exercisable for a specified period thereafter not
exceeding the remainder of the ten-year term of the option. Any options that
have not vested by the time the person ceases to be a nonemployee director may
not thereafter be exercised. The Director Plan will continue until the
1,000,000 shares of Common Stock available under the plan are issued, unless
the plan is earlier terminated by the Board of Directors.
COMPENSATION OF NAMED EXECUTIVE OFFICERS
The following table shows the compensation, for each of the last three years,
of ALLTEL's Chief Executive Officer and of ALLTEL's other four most highly
compensated executive officers as of December 31, 1994:
18
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part III
Item 11. Executive Compensation
COMPENSATION OF NAMED EXECUTIVE OFFICERS (continued)
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long-Term Compensation
Awards Payouts
Long-Term
Securities Incentive
Other Annual Underlying Plan All Other
Name Principal Position Year Salary($) Bonus($) Compensation($) Options(#) Payouts($) Compensation($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joe T. Ford Chairman and CEO 1994 650,000 585,000 -0- -0- 221,875 102,350(a)
Chairman and CEO 1993 575,000 429,813 -0- 100,000 135,417 419,518
Chairman, President,
and CEO 1992 550,000 412,500 -0- 140,000 187,500 328,246
Max E. Bobbitt* President and Chief
Operating Officer 1994 475,000 391,875 -0- -0- 146,250 70,315(a)
President 1993 425,000 285,919 -0- 75,000 98,750 281,612
Executive Vice President 1992 400,000 270,000 -0- 100,000 123,750 205,251
John E. Steuri Chairman and CEO,
ALLTEL Information
Services, Inc., a wholly-
subsidiary ("AIS") 1994 365,000 89,856 -0- -0- 97,631 34,650(b)
Chairman and CEO, AIS 1993 340,000 229,500 -0- 50,000 40,833 28,474
Chairman and CEO, AIS 1992 320,000 216,000 -0- -0- -0- 27,900
Francis X. Frantz Senior Vice President-
External Affairs and
General Counsel 1994 260,000 175,500 -0- -0- 71,000 35,849(c)
Senior Vice President-
External Affairs and
General Counsel 1993 235,000 140,530 -0- 50,000 41,000 118,696
Senior Vice President
and General Counsel 1992 215,000 129,000 -0- 60,000 41,250 74,520
Tom T. Orsini Senior Vice President-
Finance and Corporate
Development 1994 250,000 168,750 -0- -0- 53,762 36,169(c)
Senior Vice President-
Finance and Corporate
Development 1993 190,000 114,000 -0- 50,000 28,958 164,962
Vice President-Corporate
Planning 1992 165,000 99,000 -0- 50,000 31,500 118,425
<FN>
* Mr. Bobbitt retired from ALLTEL effective January 4, 1995.
(a) Includes the following amounts for Messrs. Ford and Bobbitt: contributions to the ALLTEL Profit Sharing Plan in the amount of
$15,000 in each case, allocated benefits under the ALLTEL Excess Benefit Plan in the respective amounts of $64,087 and
$41,871, dollar amount of premiums paid under supplemental split dollar life insurance policies in the respective amounts of
$5,262 and $1,628, and "above-market" earnings on deferred compensation in the respective amounts of $18,001 and $11,816
(payment of which is deferred until the deferred compensation is paid).
(b) Includes employer contribution under employee stock purchase plan in the amount of $3,046, employer contribution to the ALLTEL
Profit Sharing Plan in the amount of $7,500, employer matching contribution to the ALLTEL Thrift Plan in the amount of $2,250,
allocated benefits under the ALLTEL Excess Benefit Plan in the amount of $12,391, and dollar amount of premiums paid under
decreasing term life insurance policy in the amount of $9,463.
(c) Includes the following amounts for Messrs. Frantz and Orsini: allocated benefits under the ALLTEL Excess Benefit Plan in the
respective amounts of $15,605 and $13,901, employer contributions under the ALLTEL Profit Sharing Plan in the amount of
$15,000 in each case, dollar amount of premiums paid under supplemental split dollar life insurance policies in the respective
amounts of $86 and $0, and "above-market" earnings on deferred compensation in the respective amounts of $5,158 and $7,268
(payment of which is deferred until the deferred compensation is paid).
</FN>
</TABLE>
19
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part III
Item 11. Executive Compensation
COMPENSATION OF NAMED EXECUTIVE OFFICERS (continued)
OPTION EXERCISES IN 1994 AND 1994 YEAR-END OPTION VALUES
The following table shows information concerning stock option exercises during
1994 by ALLTEL's Chief Executive Officer and by ALLTEL's other four most highly
compensated executive officers:
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Acquired Options at 1994 Year-End Options at 1994 Year-End
Name on Exercise (#) Value Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable ($)
<S> <C> <C> <C> <C>
Joe T. Ford 10,000 $155,415 229,000/178,000 3,323,900/1,165,375
Max E. Bobbitt* -0- -0- 185,000/130,000 2,766,860/835,625
John E. Steuri -0- -0- 510,000/40,000 9,507,712/45,000
Francis X. Frantz -0- -0- 90,000/92,000 1,087,750/645,875
Tom T. Orsini -0- -0- 62,000/75,000 761,998/429,062
<FN>
* Mr. Bobbitt retired from ALLTEL effective January 4, 1995.
</FN>
</TABLE>
LONG-TERM INCENTIVE PLAN AWARDS IN 1994
ALLTEL's Long-Term Performance Incentive Compensation Plan provides ALLTEL's
executive officers with the opportunity to receive cash incentive payments
based on a three year measurement period if ALLTEL achieves a prescribed
earnings per share target during that period. At the beginning of each Plan
period, the Compensation Committee of the Board of Directors establishes the
prescribed earnings per share target for that period. Awards determined payable
for corporate level participants shall be based fully upon the degree of
attainment of corporate incentive objectives. For the three-year measurement
period of 1994 - 1996, the Committee approved objectives for Threshold, Target
and Maximum payouts based on a specific percentage increase in earnings per
share compounded annually for three years from the 1993 actual results. No
awards will be payable if the minimum Threshold level of performance is not
achieved.
The following table shows information concerning the awards made during 1994
with respect to the three-year measurement period 1994 through 1996 to ALLTEL's
Chief Executive Officer and to ALLTEL's other four most highly compensated
executive officers under the ALLTEL Long-Term Performance Incentive Plan
(other than Max E. Bobbitt, who retired from ALLTEL effective January 4, 1995,
and, accordingly, forfeited entitlement to any award made to him during 1994
with respect to the three-year measurement period 1994 through 1996):
<TABLE>
<CAPTION>
Estimated Future Payouts*
Performance Period
Name Until Payout Threshold ($) Target ($) Maximum ($)
<S> <C> <C> <C> <C>
Joe T. Ford 3 years 81,250 162,500 243,750
John E. Steuri 3 years 41,062 82,125 123,188
Francis X. Frantz 3 years 26,000 52,000 78,000
Tom T. Orsini 3 years 25,000 50,000 75,000
<FN>
* Awards will be paid upon completion of the 1996 year on the basis of ALLTEL's performance during the three year
period 1994-1996 as determined by ALLTEL's attainment of prescribed corporate and unit performance targets. In
January 1994, the Compensation Committee of the Board of Directors specified those corporate and unit performance
targets and the award levels for the indicated executive officers (which are stated as a percentage of each
executive officer's average base salary during the 1994-96 period). The estimated future payouts shown above assume
that each executive officer's average base salary during the 1994-96 period would be the same as his base salary during 1994.
</FN>
</TABLE>
20
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part III
Item 11. Executive Compensation
EXECUTIVE COMPENSATION AGREEMENTS
Mr. Joe T. Ford is employed by ALLTEL for a period extending to July 1, 2002,
under a contract with ALLTEL that provides for a minimum base annual salary
plus any incentive awards made under the Incentive Plan and the Long-Term
Incentive Plan (the "Incentive Plans"). If the Board of Directors discontinues
either or both of the Incentive Plans (or the application of either or both of
them to Mr. Ford) or should a change of control of ALLTEL (as defined in the
section "Change In Control Agreements" below) occur, the contract provides
that Mr. Ford will receive, in the year in which such event occurs, an annual
salary equal to the greater of his minimum base annual salary plus the average
incentive awards made under the Incentive Plans over the preceding three years
or his 1991 base annual salary compounded at an annual rate of 3% from
January 1, 1991, to the beginning of the year in which such event occurs;
thereafter Mr. Ford will receive an annual salary equal to the compensation
paid during the preceding year, compounded by minimum annual increases of 3%.
The contract provides for payment of disability benefits in amounts unaffected
by that disability through the end of the calendar year following the calendar
year in which the disability occurs and of a death benefit in the amount equal
to Mr. Ford's compensation for one year. Assuming compensation at the 1994
level and retirement at the expiration of the contract period, the estimated
annual benefit to be received by Mr. Ford is $714,543. The contract also
provides that Mr. Ford may retire any time prior to the expiration of the
contract period. If Mr. Ford were to elect early retirement, he would be
entitled to retirement benefits under his contract reduced in accordance with
a formula. The contract provides that those retirement benefits are in lieu of
payments under ALLTEL's defined benefit pension plan described below. The
contract provides for payment of survivorship benefits to Mr. Ford's wife,
who would receive for her life 50% of the annual retirement compensation to
which Mr. Ford is entitled. During 1994, ALLTEL accrued a total of $838,587
toward its future liability under Mr. Ford's contract.
Mr. Steuri is employed by ALLTEL Financial Information Services, Inc. for the
period extending to June 1, 2004, under a contract that provides for a
minimum base annual salary plus any incentive awards made under the Incentive
Plan. If the Board of Directors of ALLTEL discontinues the Incentive Plan (or
its application to Mr. Steuri), the contract provides that Mr. Steuri will
receive, in the year in which such event occurs, an annual salary equal to the
greater of his minimum base annual salary plus the average incentive award made
in the preceding three years (or such lesser time as the Incentive Plan has
been in effect or applicable to him) or his initial base annual salary
compounded at an annual rate of 3% from May 31, 1990, to the beginning of the
year in which such event occurs; thereafter Mr. Steuri will receive an annual
salary equal to the compensation paid during the preceding year, compounded by
minimum annual increases of 3%. The contract provides for payment of disability
benefits in amounts unaffected by that disability through the end of one full
year following the date on which that disability occurs and of death benefits
in amounts equal to Mr. Steuri's compensation for one year. Assuming
compensation at the 1994 level and retirement at the expiration of the
contract period, the estimated annual retirement benefit to be received by
Mr. Steuri would be $148,657. The contract also provides that Mr. Steuri may
retire any time on or after May 6, 1999, whereupon he would be entitled to
retirement benefits under the contract reduced in accordance with a formula
set forth therein. The contract provides for payment of survivorship benefits
to Mr. Steuri's wife, who would receive for her life 50% of the annual
retirement compensation to which Mr. Steuri is entitled. During 1994, ALLTEL
Financial Information Services, Inc. accrued a total of $240,000 toward its
future liability under Mr. Steuri's contract.
21
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part III
Item 11. Executive Compensation
EXECUTIVE COMPENSATION AGREEMENTS (continued)
The minimum base annual salary originally established in Messrs. Ford's and
Steuri's employment agreements may be increased by the Board of Directors
during the term of their Agreements. When increased, such higher amount shall
then be the minimum base annual salary and such minimum base annual salary
shall not be reduced below the highest minimum base annual salary fixed from
time to time by the Board of Directors.
Mr. Max E. Bobbitt retired as President and Chief Operating Officer of ALLTEL
effective at the close of business on January 4, 1995. In connection with that
retirement, Mr. Bobbitt and ALLTEL entered into an agreement (the
"Retirement Agreement") that superseded the contract under which Mr. Bobbitt
had been employed by ALLTEL. Under the Retirement Agreement, ALLTEL will pay
Mr. Bobbitt a retirement payment of $47,917 per month for the remainder of his
life and, if his spouse survives him, will pay her $23,958 per month thereafter
until her death. The Retirement Agreement also provides for the continuation of
health and dental coverage for Mr. Bobbitt and his spouse during their
lifetimes, for the immediate vesting of unvested options to purchase 130,000
shares of Common Stock under ALLTEL stock option plans, for the payment of
vested benefits under the other plans in which Mr. Bobbitt participated, and
for the continuation of certain supplemental split dollar life insurance
arrangements for his benefit until he reaches age 65. Mr. Bobbitt has agreed
that he will not engage in any business which competes with ALLTEL for a
period of five years following his retirement.
CHANGE IN CONTROL AGREEMENTS
During 1994, ALLTEL entered into agreements with each of Messrs. Francis X.
Frantz and Tom T. Orsini which provide that if, following a "change in
control," the executive's employment terminates within twelve months (unless
the termination is as a result of death, by ALLTEL as a result of the
executive's disability or for "cause", or by the executive without
"good reason") or if, after remaining employed for twelve months, the
executive's employment terminates during the following three-month period
(unless the termination is a result of death or is by ALLTEL as a result of
the executive's disability) (each of the foregoing events being referred to
as a "Payment Trigger"), ALLTEL is required to pay the executive an amount
equal to three times the sum of his base salary as in effect immediately
prior to the change in control or Payment Trigger and the maximum amounts he
could have received under the Incentive Plans for the period commencing
coincident with or most recently prior to the period in which the change in
control or Payment Trigger occurs, but reduced by any other cash severance
paid to him. ALLTEL also is required to make an additional payment to the
executive in the amount of any excise tax under Section 4999 of the Internal
Revenue Code as a result of any payments or distributions by ALLTEL plus the
amount of all additional income tax payable by him as a result of such
additional payments. Payments under the agreements are covered by ALLTEL's
"grantor trust" described below. The agreements generally are effective for
ten years.
22
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part III
Item 11. Executive Compensation
CHANGE IN CONTROL AGREEMENTS (continued)
As used in the section entitled "Executive Compensation Agreements" and this
section, "change in control" is defined as:
(i) Any "person", as defined in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934, as mended (the "Exchange Act"), other than the
Company, any of its subsidiaries, or any employee benefit plan
maintained by the Company or any of its subsidiaries, becomes the
"beneficial owner" (as defined in Rule l3d-3 under the Exchange Act)
of (A) l5% or more, but no greater than 50%, of the outstanding
voting capital stock of the Company, unless prior thereto, the
Continuing Directors approve the transaction that results in the
person becoming the beneficial owner of 15% or more, but no greater
than 50%, of the outstanding voting capital stock of the Company
or (B) more than 50% of the outstanding voting capital stock of the
Company, regardless whether the transaction or event by which the
foregoing 50% level is exceeded is approved by the Continuing
Directors;
(ii) At any time Continuing Directors no longer constitute a majority of
the directors of the Company; or
(iii) A record date is fixed for determining stockholders entitled to vote
upon (A) a merger or consolidation of the Company, statutory
share exchange, or other similar transaction with another
corporation, partnership, or other entity or enterprise in which
either the Company is not the surviving or continuing corporation
or shares of common stock of the Company are to be converted into
or exchanged for cash, securities other than common stock of the
Company, or other property, (B) a sale or disposition of all or
substantially all of the assets of the Company, or (C) the
dissolution of the Company; or
(iv) The Company enters into an agreement with any Person, the
consummation of which would result in the occurrence of an event
described in clause (i), (ii) or (iii) above.
DEFINED BENEFIT PENSION PLAN
ALLTEL maintains a trusteed, noncontributory, defined benefit pension plan
covering salaried and non-salaried employees under which benefits are not
determined primarily by final compensation (or average final compensation).
Under this pension plan, each of Francis X. Frantz and Tom T. Orsini, following
retirement, would have each period of post-January 1, 1988, service credited at
1% of compensation, plus .4% of that part of his compensation that exceeds the
Social Security Taxable Wage Base for such year. Service prior to 1988, if any,
would be credited on the basis of a percentage of his highest consecutive
five-year average annual base salary, equal to 1% for each year of service
prior to 1982 and thereafter increasing by .05% each year until 1988, but only
prospectively, i.e., with respect to service earned in such succeeding year;
in addition, each of Messrs. Frantz and Orsini would receive an additional
credit of .25% for each pre-1988 year of service after age 55, subject to a
maximum of 10 years' such credit, and would have added to his annual pension
benefits an amount equal to .4% of the amount by which his pre-1988 career
average annual base salary (three highest years) exceeds his Social Security
covered compensation, multiplied by his years of pre-1988 credited service.
Various benefit payment options are available on an actuarially equivalent
basis, including joint and survivor benefits. Compensation included in the
pension base includes cash awards under the Incentive Plans.
23
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part III
Item 11. Executive Compensation
DEFINED BENEFIT PENSION PLAN (continued)
Assuming compensation at the 1994 level, continuation in the position he held
during 1994, and retirement at age 65, the estimated annual benefit under the
pension plan for each of Francis X. Frantz and Tom T. Orsini is $56,135 and
$63,182 respectively. (None of the other executives included in the Summary
Compensation Table on page 19 is a participant in or entitled to benefits under
the pension plan.) Amounts shown are straight life annuity amounts and include
amounts payable under the defined benefit portion of the ALLTEL Excess Benefit
Plan.
EXCESS BENEFIT PLAN
Federal laws place certain limitations on pensions that may be paid under
federal income tax qualified plans. The ALLTEL Excess Benefit Plan provides for
the payment to certain employees outside tax-qualified pension and profit
sharing plans of any amounts not payable under the tax-qualified pension plans
by reason of limitations specified in the Internal Revenue Code. Currently,
under the ALLTEL Excess Benefit Plan, Messrs. Ford, Steuri, Frantz, and Orsini
are eligible for accruals with respect to benefits not payable under ALLTEL's
defined contribution profit sharing plan, and Messrs. Frantz and Orsini are
eligible for accruals with respect to benefits not payable under ALLTEL's
defined benefit pension plan. Amounts accrued under the defined contribution
portion of these plans in 1994 for each of these executives are included in
the Summary Compensation Table on page 19.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
ALLTEL maintains a non-qualified supplemental executive retirement plan
(the "SERP") in which certain employees designated by the Board of Directors,
including Messrs. Frantz and Orsini, participate. The SERP provides with
respect to Messrs. Frantz and Orsini that, upon normal retirement at age 65
(or, if earlier, following a Payment Trigger that occurs after the
participant's early retirement date), the executive will receive an annual
benefit under the SERP, payable as a single life annuity, equal to 60% of the
sum of (A) the highest of (i) his total compensation for the calendar year
preceding his retirement, (ii) his average annual compensation for the three
calendar years preceding his retirement, or (iii) if a Payment Trigger has
occurred, his annual base salary as in effect immediately prior to the change
in control (as defined in the change in control agreements described above),
the Payment Trigger, or his retirement date, plus (B) the highest of the
maximum amounts payable to him under the Incentive Plans for the period
coincident with or most recently prior to a change in control, Payment Trigger
or retirement. The amount of the normal retirement benefit under the SERP is
not determined based on years of service.
Each of Messrs. Frantz and Orsini also is entitled to an early retirement
benefit under the SERP if he retires before becoming entitled to the normal
retirement benefit but after attaining the age of 60 with 15 or more years of
service or age 55 with 20 or more years of service or after a Payment Trigger
occurs (regardless of his years of service). The early retirement benefit is
calculated the same as the normal retirement benefit, except that the
percentage used in the calculation is 45% (increased ratably for the number of
years of his service after the early retirement date, up to a maximum of 60%)
rather than 60%.
24
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part III
Item 11. Executive Compensation
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (continued)
If Mr. Frantz or Mr. Orsini dies after benefits commence, his spouse will
receive 50% of the amount that he was receiving prior to his death. If he
dies while employed, his surviving spouse will receive 50% of the amount that
he would have received if he had retired on the day before death. Following
retirement, each of Messrs. Frantz and Orsini (and his spouse and dependents)
also is entitled to receive post-retirement medical benefits under the SERP
together with reimbursement for any additional taxes incurred as a result of
the benefits being taxed less favorably than they would have been if received
by other retired employees. Payments to Messrs. Frantz and Orsini under the
SERP are covered by ALLTEL's "grantor trust" described below.
The retirement benefits payable under the SERP are reduced by benefits (other
than benefits attributable to employee contributions) paid under other ALLTEL
qualified and nonqualified benefit plans other than the Allied Telephone
Company Profit Sharing Plan. The benefits under the SERP are not subject to
offset for Social Security. The estimated annual benefits payable to Messrs.
Frantz and Orsini under the SERP upon retirement at normal retirement age
are $29,901 and $22,664, respectively.
GRANTOR TRUST
ALLTEL maintains a "grantor trust" under Section 671 of the Internal Revenue
Code (the "Trust") to provide certain participants in designated compensation
and supplemental retirement plans and arrangements with greater assurance that
the benefits and payments to which those participants are entitled under those
plans and arrangements will be paid. Contributions by ALLTEL to the Trust are
discretionary and totaled $3,114,000 as of December 31, 1994. Prior to a
"change of control" of ALLTEL (as defined in the trust agreement for the
Trust), benefits may not be paid from the Trust. Following a
"change of control" of ALLTEL, benefits and payments may be paid from the Trust
to the extent those benefits and payments are not paid by ALLTEL or its
successor. The assets of the Trust are subject to the claims of the creditors
of ALLTEL in the event ALLTEL becomes "insolvent" (as defined in the trust
agreement for the Trust).
Item 13. Certain Relationships and Related Transactions.
For information pertaining to Certain Relationships and Related Transactions,
refer to "Certain Transactions" in ALLTEL's Proxy Statement for its 1995 Annual
Meeting of Stockholders, which is incorporated herein by reference.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ALLTEL Corporation
Registrant
By /s/ Joe T. Ford
Joe T. Ford, Chairman, President and Date: February 21, 1995
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
By /s/ Dennis J. Ferra Date: February 21, 1995
Dennis J. Ferra, Senior Vice President -
Accounting and Administration
(Principal Accounting Officer)
* Joe T. Ford, Chairman, President,
Chief Executive Officer, and Director
(Principal Executive Officer)
* Dennis J. Ferra, Senior Vice President -
Accounting and Administration
(Principal Accounting Officer)
* Tom T. Orsini, Senior Vice President -
Finance and Corporate Development
(Principal Financial Officer)
By /s/ Dennis J. Ferra
* Ben W. Agee, Director * (Dennis J. Ferra,
Attorney-in-fact)
* Lawrence L. Gellerstedt III, Director
Date: February 21, 1995
* W. W. Johnson, Director
* Emon A. Mahony, Jr., Director
* George C. McConnaughey, Director
* John P. McConnell, Director
* Philip F. Searle, Director
* John E. Steuri, Director
* Carl H. Tiedemann, Director
* Ronald Townsend, Director
* William H. Zimmer, Jr., Director
26
