SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1 TO QUARTERLY REPORT FILED PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
Commission file number 1-4996
ALLTEL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 34-0868285
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Allied Drive, Little Rock, Arkansas 72202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (501) 661-8000
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
Number of common shares outstanding as of June 30, 1995:
188,887,000
The Exhibit Index is located on page 13 of this amendment.
<PAGE>
SIGNATURE
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its quarterly report on Form 10-Q as
of June 30, 1995 as set forth in the pages attached hereto:
(List all such items, financial statements, exhibits
or other portions amended)
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 June 30, 1995, a copy of which is attached
hereto, are incorporated herein by reference:
Consolidated Statements of Income - for the three, six and
twelve months ended June 30, 1995 and 1994.
Consolidated Balance Sheets - June 30, 1995 and 1994 and
December 31, 1994.
Consolidated Statements of Cash Flows - for the six
and twelve months ended June 30, 1995 and 1994.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 6. Exhibits and Reports on Form 8-K
(a) See the "Exhibit Index" located on page 13 of this amendment.
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
August 28, 1995
2
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ALLTEL CORPORATION
FORM 10-Q
PART I - FINANCIAL STATEMENTS
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
FINANCIAL CONDITION
Total capital structure was $3.662 billion at June 30, 1995, reflecting
49% common and preferred equity and 51% 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
and to expand its presence into new and existing telephone, cellular and
information services markets.
Capital expenditures for the three and six month periods in 1995 were
$139.4 million and $279.5 million, respectively, compared to $146.8 million
and $256.4 million for the same periods in 1994. During the first six months
of 1995, the Company financed the majority of its capital expenditures through
the internal generation of funds. Capital expenditures are forecast at $549.6
million for 1995, which are expected to be financed primarily from internally
generated funds. The Company's capital expenditures were directed toward
telephone operations to continue to modernize its network and invest in new
equipment to provide new telecommunications services. In addition, capital
expenditures were incurred for expansion into existing cellular and information
services markets, and to upgrade the Company's cellular network facilities.
The Company has a $500 million revolving credit agreement. Total
borrowings outstanding under this agreement were $168.4 million at
June 30, 1995, compared to $132.0 million at December 31, 1994. At
June 30, 1994, $104.4 million was outstanding under this agreement. The
weighted average interest rate on borrowings outstanding under this agreement
as of June 30, 1995 was 6.3%. The increase in borrowings under the revolving
credit agreement for the six and twelve month periods was incurred for
expansion of cellular investments and for other general corporate requirements.
Long-term debt issued in the three and six month periods 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 issuance of the notes by the subsidiaries and additional
borrowings under the revolving credit agreement account for the majority of
long-term debt issued during the twelve months ended June 30, 1995.
3
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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.
Telephone operations revenues and sales increased $7.2 million or 2%,
$15.4 million or 3%, and $76.3 million or 7% for the three, six, and twelve
months ended June 30, 1995, respectively. Telephone operating income increased
$6.3 million or 6%, $12.6 million or 6% and $26.9 million or 7% for the three,
six and twelve month periods, respectively. The acquisition of the GTE Georgia
properties accounted for $74.6 million of the increase in revenues and sales
and $34.4 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 $6.5 million or 7%, $12.3 million or 6%
and $46.8 million or 13% in the three, six, and twelve month periods,
respectively. The increase in revenues for the three and six month periods
primarily resulted from growth in customer access lines and growth in custom
calling feature revenues. The acquisition of the GTE Georgia properties
accounted for $28.6 million of the increase in local service revenues for the
twelve month period. Increases in customer access lines and growth in
custom 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 subsidiaries during 1995, and management
does not anticipate filing for any local rate increases during the remainder
of 1995.
Network access and long-distance revenues decreased $0.6 million for the
three month period, increased $0.7 million for the six month period and
increased $19.4 million or 3% for the twelve month period, respectively. The
acquisition of the GTE Georgia properties accounted for $40.0 million of the
increase in network access and long-distance revenues for the twelve month
period. Although higher volumes of access usage occurred in all periods of
1995, growth in network access and long-distance revenues has been impacted by
certain regulatory commission actions designed to reduce earnings levels in
Ohio (effective May 1, 1994) and California (effective January 1, 1995).
Additionally, two of the Company's telephone operating subsidiaries changed
their method of settling interstate access revenues from an average schedule
to cost method. The effect of these regulatory actions have resulted in net
decreases in revenues of approximately $5.5 million, $13.9 million and $27.8
million for the three, six and twelve month periods ended June 30, 1995,
respectively.
4
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Miscellaneous revenues increased $1.4 million or 4%, $2.4 million or 3%
and $10.0 million or 7% for the three, six and twelve month periods,
respectively. The increases in the three and six month periods were primarily
due to increases in direct sales of telephone equipment, sales of telephone
equipment protection plans and directory advertising revenues. The
acquisition of the GTE Georgia properties accounted for $6.0 million of the
increase in the twelve month period. Increases in direct sales of telephone
equipment, intrastate billing and collection revenues, rental revenues,
directory advertising revenues and sales of telephone equipment protection
plans also contributed to the increase in revenues for the twelve month period.
Total telephone operating expenses increased $0.9 million, $2.8 million
or 1%, and $49.4 million or 7% for the three, six, and twelve month periods,
respectively. The acquisition of the GTE Georgia properties accounted for
$40.2 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, increased cost of products sold related to direct sales of telephone
equipment and protection plans, and increased information service charges and
depreciation expense. These increases were partially offset by lower
maintenance expense related to electro-mechanical switching equipment, and
decreases in call completion services and other general and administrative
expenses, reflecting the Company's ongoing cost control efforts. Operating
expenses also decreased in all periods due to the elimination of transitional
customer billing services provided by GTE for the GTE Georgia properties.
These properties were converted to the Company's billing system in February
1994.
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 ("Citizens") in exchange for
approximately $290 million in cash, assumed debt and 3,600 access lines in
Pennsylvania. The sale of the telephone properties in Oregon and West Virginia
were completed at the end of the second quarter of 1995, and resulted in a
pre-tax gain of $30.9 million. The sale of the remaining telephone properties
will be completed on a state-by-state basis as necessary regulatory approvals
are obtained. The Company expects to complete the sale of the remaining
properties by the end of 1995, assuming the required regulatory approvals are
received and that all other conditions and requirements are satisfied. The
telephone properties to be disposed of represent approximately 10 percent of
the telephone operations' revenues and operating income for the three, six
and twelve month periods ended June 30, 1995, respectively.
5
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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.
Information Services
Revenues and sales for the information services segment reflect increases
of $12.5 million or 6%, $31.0 million or 7% and $121.1 million or 16% for the
three, six and twelve month periods, respectively. Growth in operating income
for the information services segment continues to be adversely affected by the
number of mergers and consolidations occurring in the financial services and
mortgage industries and the slowdown of mortgage refinancing activities. As a
result, operating income decreased $5.4 million or 16%, $7.1 million or 11%
and increased $1.3 million or 1% for the three, six and twelve month periods,
respectively.
Information services' revenues and sales increased in all periods
primarily due to increases in the telecommunications and healthcare portions of
its outsourcing business. Additional services provided under new and 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. Healthcare services' revenues and sales increased
primarily due to the acquisitions of Medical Data Technology, Inc. ("MDT") in
November 1994 and 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, a reduction in
revenues collected for early termination of facilities management contracts,
and by decreases in software licensing fees and international software sales.
As a result of the consolidation of the mortgage industry and the decrease in
mortgage refinancing activity, fees earned related to the processing and
servicing of mortgage loans also decreased in all periods.
6
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The decreases in operating income for the three and six month periods
primarily resulted from lost operations due to contract terminations, an
increase in operating costs including corporate operations and depreciation
and amortization expense, and by reductions in high margin licensing fees and
fees collected on the early termination of facilities management contracts.
The increase in operating income for the twelve month period reflects the
increase in revenues and sales previously discussed, partially offset by a
reduction in fees collected on the early termination of facilities management
contracts, lost operations from contract terminations, a reduction in high
margin licensing fees, and increases in corporate operating expenses and
depreciation and amortization expense. The increase in corporate operating
expenses for all periods reflects approximately $3 million in severance
pay costs relating to the planned workforce reduction announced by this
segment in June 1995. Depreciation and amortization expense increased in all
periods primarily due to the acquisition of additional data processing
equipment and due to an increase in amortization of internally developed
software.
As a result of the declining contributions from this segment's check
processing and community banking operations, the Company recorded a pre-tax
write-down of approximately $54.2 million to reflect the net realizable value
of these operations in December 1994. In accordance with the Company's plan
for the disposal of the check processing operations, the Company recorded an
additional $5.0 million pre-tax write-down in the second quarter of 1995 to
reflect the current estimated net realizable value of these operations.
7
<PAGE>
Product Distribution Operations
The product distribution segment produced double-digit growth in both
revenues and sales and operating income. Revenues and sales reflect increases
of $10.8 million or 10%, $21.7 million or 10% and $70.0 million or 18% for the
three, six and twelve month periods, respectively. Operating income increased
$1.4 million or 25%, $3.2 million or 29% and $8.1 million or 43% for the three,
six and twelve month periods, respectively.
The increases in revenues and sales for all periods were primarily due to
growth in sales of telecommunications and data products to new and existing
customers. Increased sales to affiliates accounted for approximately $5.2
million, $7.4 million and $37.9 million of the increase in sales for the three,
six and twelve month periods, respectively. Sales of electrical wire and
cable also increased in all periods reflecting increased copper prices and a
higher demand for these products.
Operating income increased in all periods primarily because of the
increases in revenues and sales noted above. Increased profit margins of
electrical wire and cable products, primarily resulting from the increase in
copper prices, also contributed to the growth in operating income in all
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 $34.9 million or 51%, $63.6 million or 49% and $121.0
million or 53% for the three, six and twelve month periods, respectively.
Operating income increased $11.2 million or 51%, $17.5 million or 47% and
$39.0 million or 62% for the three, six and twelve month periods, respectively.
Subscriber growth remained strong, as approximately 159,000 units have been
placed in service during the first six months of 1995, reflecting the results
of several aggressive sales promotions. For the twelve month period ended
June 30, 1995, the number of cellular customers grew to 568,098 from 360,493,
an increase of 207,605 customers or 58%.
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 also contributed to the growth in revenues and sales in all
periods. Operating income increased for all periods reflecting the increases
in revenues and sales noted above, partially offset by higher expenses
for selling and advertising, depreciation and other operating expenses.
8
<PAGE>
Other Operations
Other operations revenues and sales decreased $7.8 million or 18%, $12.9
million or 14% and increased $11.1 million or 8% for the three, six and twelve
month periods, respectively. Operating income decreased $2.6 million or 59%,
$4.9 million or 54% and $3.3 million or 24% for the three, six and twelve
month periods, respectively.
Revenues and sales for other operations decreased in the three and six
month periods 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, revenues and sales for the
three, six and twelve month periods ended June 30, 1994 include approximately
$5.7 million, $13.8 million and $32.9 million, respectively, of additional
revenues related to directories accounted for under the previous method. In
addition, fewer directories were published in the three and six month periods
of 1995 compared to the prior-year periods. 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 June 30, 1995 was 357 compared to
only 234 directories published during the same period in 1994. The
acquisition of the GTE Directories' operations accounted for $39.4 million of
the increase in revenues and sales for the twelve month period. This increase
was partially offset by the impact on operating revenues due to the change in
revenue and expense recognition discussed above.
Operating income decreased in the three and six month periods primarily
due to the decreases in revenues and sales previously noted. Operating income
for the twelve month period decreased primarily due to increases in operating
expenses including publishing rights, directory services, printing and
distribution costs and selling-related expenses, resulting from the overall
growth and expansion of the directory publishing operations. For all periods
of 1995, operating income also reflects lower margins realized on directories
published for affiliates, due to increased fees for publishing rights under the
terms of a new contract that became effective January 1, 1995.
9
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Corporate Expenses
Corporate operating expenses increased $3.1 million or 65%, $2.2 million
or 21% and $0.5 million or 2% for the three, six and twelve month periods,
respectively. The increases in all periods reflect the reclassification of
the amortization of telephone plant acquisition adjustments related to the GTE
Georgia properties acquisition. For all periods of 1994, this amortization
expense was classified as non-operating expense. Increased employee benefit
costs also contributed to the increases in corporate operating expenses for
the three and twelve month periods. The increases for the twelve month period
were partially offset by a reduction in operating expenses including costs
related to building operations.
Other Income, Net
Other income, net increased $2.9 million or 94%, $5.7 million or 132%
and $2.9 million or 90% for the three, six and twelve month periods,
respectively. The increases in all periods were primarily due to increases in
equity income recognized on investments in cellular limited partnerships and
increases in capitalized interest costs related to long-term construction
projects. In addition, other income, net for all periods of 1995 does not
include the amortization of telephone plant acquisition adjustments related to
the GTE Georgia properties acquisition that were reclassified to corporate
operating expenses as previously discussed. The increases in all periods were
partially offset by increases in the minority interest in earnings of the
Company's cellular operations by others. The increases in equity income for
all periods reflects the improved operating results of those partnership
interests not managed by the Company.
Interest Expense
Interest expense increased $3.4 million or 10%, $9.0 million or 14% and
$27.6 million or 23% for the three, six and twelve month periods, respectively,
primarily due to an increase in long-term debt outstanding. The increase in
interest expense for the three month period reflects the additional amounts
borrowed under the Company's revolving credit agreement. The increases in
interest expense for the six and twelve month periods primarily resulted from
the issuance of $250 million debentures in April 1994 to reduce borrowings
under the Company's revolving credit agreement. The increase in interest
expense for the twelve month period also reflects the issuance of $400 million
debentures in November 1993 to finance the GTE Georgia properties acquisition.
10
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Gain on Disposal or Exchange of Assets, Write-down of Assets and Other
As previously discussed, during the second quarter of 1995, the Company
recorded a gain of $30.9 million on the sale of its telephone properties in
West Virginia and Oregon to Citizens, and the Company recorded an additional
write-down of $5.0 million to reflect the current estimated net realizable
value of its information services segment's check processing operations. The
net income impact from these transactions resulted in an increase of $16.6
million in net income and $.09 in earnings per share for the three and six
month periods ended June 30, 1995, respectively.
In addition to reflecting the impact of the above transactions, net
income for the twelve month period also includes a write-down of $54.2 million
recorded by the Company in the fourth quarter of 1994. This write-down was
recorded to reflect the net realizable value of the Company's information
services segment's community banking and check processing operations. The
net income impact from the gain on the sale of telephone properties and the
write-downs resulted in a decrease of $.08 in earnings per share for the
twelve month period ended June 30, 1995.
In the fourth quarter of 1993, the Company recorded a gain on exchange of
telephone properties with GTE, which was partially offset by the reorganization
of its telephone operations as a result of this transaction. These
transactions amounted to $69.9 million. In addition, the Company recorded a
write-down of $42.5 million to reflect an impairment in the carrying value of
its product distribution operations. The net income impact of these
transactions is not significant to the results of operations for the twelve
month period ended June 30, 1994.
Income Taxes
Income tax expense increased $11.4 million or 24%, increased $13.1 million
or 14% and decreased $26.0 million or 13% for the three, six and twelve month
periods, respectively. The increase in the three and six month periods
primarily resulted from an increase in taxable income. The decrease in income
tax expense for the twelve month period was primarily due to the tax benefit
resulting from the write-down of the information services operations recorded
in December 1994. In addition, income tax expense for the twelve months ended
June 30, 1994 does not reflect a tax benefit from the write-down of product
distribution operations, since utilization of the benefit is not certain.
11
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Net Income Applicable to Common Shares
Net income applicable to common shares increased $22.0 million or 29%,
$28.7 million or 19% and $17.5 million or 6% for the three, six and twelve
month periods, respectively. Primary earnings per common share for the three,
six and twelve month periods ended June 30, 1995 increased 30%, 19% and 6%,
respectively over the same periods in 1994. The three and six month periods
for 1995 include the effect of the gain on the sale of certain telephone
properties and the additional write-down of the information services segment's
check processing operations. The net income impact from these transactions
resulted in an increase of $.09 in earnings per share. The twelve month period
for 1995 also includes the effect of the December 1994 write-down of the
information services segment's community banking and check processing
operations. Excluding these transactions, net income would have increased
$5.3 million or 7%, $12.0 million or 8% and $32.9 million or 12% and earnings
per share would have increased 8%, 8% and 11% for the three, six and twelve
month periods, respectively.
The twelve month period for 1994 includes the effect of the net gain on
exchange of telephone properties with GTE partially offset by the
reorganization of the Company's telephone operations and the partial
write-down of the product distribution operations. The net income impact of
these transactions is not significant to the results of operations for the
twelve month period.
Average Common Shares Outstanding
The average number of common shares outstanding increased slightly in
each of the three, six and twelve month periods ended June 30, 1995. The
increases in all periods are primarily due to additional shares issued under
stock option plans. The increases in the three and six month periods also
reflect the issuance of approximately 0.3 million shares in connection with
the acquisition of MDT. The increase in the twelve month period also reflects
the issuance of approximately 2.0 million shares in October 1993 for the
acquisition of TDS.
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ALLTEL CORPORATION
FORM 10-Q
INDEX OF EXHIBITS
Form 10-Q Sequential
Exhibit No. Description Page No.
(19) Interim Report to Stockholders 14 - 22
and Notes to Consolidated
Financial Statements for the periods
ended June 30, 1995
13
<TABLE>
EXHIBIT 19
HIGHLIGHTS (Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended June 30, Six Months Ended June 30, Twelve Months Ended June 30,
% Increase % Increase % Increase
1995 1994 (Decrease) 1995 1994 (Decrease) 1995 1994 (Decrease)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues and sales $786,476 $728,898 8 $1,550,091 $1,431,322 8 $3,046,445 $2,646,896 15
Net income $ 98,104 $ 76,187 29 $ 176,727 $ 148,073 19 $ 300,407 $ 283,105 6
Primary earnings per average
common share outstanding $.52 $.40 30 $.93 $.78 19 $1.58 $1.49 6
Excluding gain on disposal or
exchange of assets, write-
down of assets and other:
Net income $ 81,497 $ 76,187 7 $ 160,120 $ 148,073 8 $ 316,023 $ 283,126 12
Earnings per share $.43 $.40 8 $.84 $.78 8 $1.66 $1.49 11
Average common shares
including equivalents 189,874,000 189,387,000 - 189,948,000 189,488,000 - 189,640,000 188,866,000 -
Annual dividend rate
per common share $.96 $.88 9
Total assets $4,921,398 $4,418,415 11
Telephone access lines 1,650,004 1,616,741 2
Cellular customers 568,098 360,493 58
</TABLE>
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<TABLE>
BUSINESS SEGMENTS (Unaudited)
(Dollars in thousands)
Three Months Ended June 30, Six Months Ended June 30, Twelve Months Ended June 30,
% Increase % Increase % Increase
1995 1994 (Decrease) 1995 1994 (Decrease) 1995 1994 (Decrease)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES AND SALES:
Telephone $302,545 $295,367 2 $ 605,071 $ 589,659 3 $1,193,689 $1,117,391 7
Information services 227,904 215,423 6 446,217 415,215 7 892,502 771,357 16
Product distribution 116,216 105,391 10 229,706 208,026 10 458,323 388,358 18
Cellular 103,366 68,443 51 192,085 128,517 49 350,914 229,926 53
Other operations 36,445 44,274 (18) 77,012 89,905 (14) 151,017 139,864 8
Total $786,476 $728,898 8 $1,550,091 $1,431,322 8 $3,046,445 $2,646,896 15
OPERATING INCOME:
Telephone $106,672 $100,395 6 $ 214,570 $ 201,954 6 $ 412,823 $ 385,901 7
Information services 29,040 34,397 (16) 56,585 63,726 (11) 122,624 121,282 1
Product distribution 7,208 5,765 25 14,343 11,154 29 27,109 18,968 43
Cellular 33,032 21,825 51 54,496 36,949 47 102,202 63,165 62
Other operations 1,755 4,329 (59) 4,123 8,978 (54) 10,415 13,668 (24)
Corporate expenses (7,924) (4,803) 65 (12,796) (10,576) 21 (22,171) (21,693) 2
Total $169,783 $161,908 5 $ 331,321 $ 312,185 6 $ 653,002 $ 581,291 12
</TABLE>
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<TABLE>
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Six Months Twelve Months
Ended June 30, Ended June 30, Ended June 30,
1995 1994 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C>
REVENUES AND SALES $786,476 $728,898 $1,550,091 $1,431,322 $3,046,445 $2,646,896
COSTS AND EXPENSES:
Cost of products sold 114,826 101,198 229,895 198,604 453,369 361,753
Operations 346,690 327,164 682,480 646,797 1,327,934 1,187,807
Maintenance 36,993 38,138 74,151 73,380 152,019 141,961
Depreciation and amortization 100,557 84,576 197,031 167,504 391,490 311,617
Taxes, other than income taxes 17,627 15,914 35,213 32,852 68,631 62,467
Total costs and expenses 616,693 566,990 1,218,770 1,119,137 2,393,443 2,065,605
OPERATING INCOME 169,783 161,908 331,321 312,185 653,002 581,291
Other income, net (178) (3,058) 1,398 (4,340) (326) (3,181)
Interest expense (37,896) (34,510) (75,028) (65,995) (146,153) (118,507)
Income before gain on disposal or
exchange of assets, write-down
of assets, other, and income taxes 131,709 124,340 257,691 241,850 506,523 459,603
Gain on disposal or exchange of assets,
write-down of assets and other 25,927 -- 25,927 -- (28,230) 27,390
Income before income taxes 157,636 124,340 283,618 241,850 478,293 486,993
Federal and state income taxes 59,532 48,153 106,891 93,777 177,886 203,888
Net income 98,104 76,187 176,727 148,073 300,407 283,105
Preferred dividends 279 317 596 627 1,201 1,396
Net income applicable to common shares $ 97,825 $ 75,870 $ 176,131 $ 147,446 $ 299,206 $ 281,709
PRIMARY EARNINGS PER SHARE: $.52 $.40 $.93 $.78 $1.58 $1.49
</TABLE>
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<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
Six Months Twelve Months
Ended June 30, Ended June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $305,149 $246,344 $639,682 $ 541,628
CASH USED IN INVESTING:
Additions to property, plant and equipment 279,451 256,360 619,203 491,908
Purchase of subsidiaries,
net of cash acquired -- -- -- 443,000
Sale of property (84,828) -- (84,828) --
Additions to investments 17,276 1,676 25,064 7,069
Other, net 27,577 15,811 61,393 77,871
Net cash used in investing activities 239,476 273,847 620,832 1,019,848
CASH (PROVIDED) USED IN FINANCING:
Dividends on preferred and common stock 91,122 83,196 177,962 162,489
Reductions in long-term debt 32,874 135,386 45,272 197,050
Long-term debt issued (36,385) (265,853) (175,415) (824,108)
Common stock issued (9,192) (3,117) (22,925) (4,939)
Other, net 381 (73) 11,824 3,248
Net cash (provided) used in
financing activities 78,800 (50,461) 36,718 (466,260)
Increase (decrease) in cash
and short-term investments (13,127) 22,958 (17,868) (11,960)
CASH AND SHORT-TERM INVESTMENTS:
Beginning of period 26,098 7,881 30,839 42,799
End of period $ 12,971 $ 30,839 $ 12,971 $ 30,839
</TABLE>
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<TABLE>
CONSOLIDATED BALANCE SHEETS (Unaudited)
ASSETS (Dollars in thousands)
June 30, Dec. 31, June 30,
1995 1994 1994
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and short-term investments $ 12,971 $ 26,098 $ 30,839
Accounts receivable 549,342 533,244 466,195
Materials and supplies 28,998 24,348 27,203
Inventories 89,229 94,458 69,621
Prepaid expenses 21,827 14,579 18,269
Total current assets 702,367 692,727 612,127
Investments 444,645 332,748 296,194
Excess of cost over equity
in subsidiary companies 496,676 494,861 495,287
PROPERTY, PLANT AND EQUIPMENT:
Telephone 3,726,433 3,756,894 3,600,850
Information services 405,448 380,182 334,628
Cellular 399,326 324,258 250,157
Other 30,408 25,011 22,993
Under construction 264,120 210,496 242,958
Total property, plant and equipment 4,825,735 4,696,841 4,451,586
Less accumulated depreciation 1,823,930 1,733,610 1,677,306
Net property, plant and equipment 3,001,805 2,963,231 2,774,280
OTHER ASSETS 275,905 230,311 240,527
TOTAL ASSETS $4,921,398 $4,713,878 $4,418,415
</TABLE>
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<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, Dec. 31, June 30,
1995 1994 1994
<S> <C> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 38,722 $ 51,676 $ 56,580
Accounts payable 226,939 259,723 225,412
Advance payments and customers' deposits 63,049 57,042 63,754
Accrued taxes 57,528 21,171 43,151
Accrued dividends 45,195 45,158 41,736
Other current liabilities 139,128 170,845 155,956
Total current liabilities 570,561 605,615 586,589
DEFERRED CREDITS:
Investment tax 26,556 31,077 35,031
Income taxes 452,612 385,469 346,741
Total deferred credits 479,168 416,546 381,772
Long-term debt 1,836,197 1,846,150 1,714,057
Other liabilities 248,270 212,369 162,578
Preferred stock, redeemable 7,513 7,829 8,046
SHAREHOLDERS' EQUITY
Preferred stock 9,287 9,320 9,358
Common stock 188,887 187,981 187,851
Additional capital 347,698 339,436 337,072
Unrealized holding gain on investments 144,039 84,275 63,848
Retained earnings 1,089,778 1,004,357 967,244
Total shareholders' equity 1,779,689 1,625,369 1,565,373
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,921,398 $4,713,878 $4,418,415
</TABLE>
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<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL STATEMENT PRESENTATION:
The consolidated financial statements at June 30, 1995 and 1994 and for
the three, six and twelve month periods then ended are unaudited and
reflect all adjustments (consisting only of normal recurring adjustments)
which are, in the opinion of management, necessary for a fair presentation
of the financial position and operating results for the interim periods.
2. ACCOUNTING POLICIES-EVALUATION OF GOODWILL:
The Company continually evaluates the existence of goodwill impairment on
the basis of whether the goodwill is fully recoverable from projected,
undiscounted net cash flows of the related business unit.
3. PENDING SALE OF CERTAIN TELEPHONE PROPERTIES:
In November 1994, the Company signed definitive agreements to sell
certain telephone properties serving approximately 113,000 access lines
in Arizona, California, Nevada, New Mexico, Oregon, Tennessee, Utah and
West Virginia to Citizens Utilities in exchange for approximately $290
million in cash, assumed debt and 3,600 access lines in Pennsylvania. In
addition, the Company signed a long-term agreement to provide information
processing services for the telephone operations of Citizens Utilities.
The sale of the telephone properties in Oregon and West Virginia was
completed at the end of the second quarter and resulted in a pre-tax gain
of $30.9 million. The sale of the remaining telephone properties will be
completed on a state-by-state basis as necessary regulatory approvals are
obtained. The Company expects to complete the sale of the remaining
properties by the end of 1995, assuming the required regulatory approvals
are received and that all other conditions and requirements are satisfied.
Once completed, this transaction will result in the Company's telephone
operating subsidiaries serving approximately 1.5 million access lines in
14 states. Net proceeds from this transaction will be used to reduce the
Company's outstanding long-term debt. The operations of the telephone
properties to be disposed of represented approximately 4 percent of the
Company's revenues and approximately 6 percent, 6 percent and 9 percent of
the Company's net income for the three, six and twelve month periods ended
June 30, 1995, respectively.
20
<PAGE>
To ALLTEL STOCKHOLDERS:
ALLTEL Corporation recently announced its financial results for the period
ended June 30, 1995.
Second quarter earnings were 52 cents per share, compared to 40 cents
per share a year ago. Net income was $98,104,000, compared to $76,187,000 in
the second quarter of 1994. Revenues and sales were $786,476,000, up from
$728,898,000 in the corresponding quarter of 1994.
The 1995 second quarter results include a net after-tax gain of $17
million or 9 cents per share, resulting from the previously announced sale of
ALLTEL's West Virginia and Oregon telephone operations. Excluding the gain,
net income from operations was $81,497,000, and earnings per share were 43
cents, up 8 percent from the second quarter of 1994.
Earnings per share for the six months ended June 30, 1995 were 93 cents,
compared to 78 cents a year ago. Net income was $176,727,000, compared to
$148,073,000 in the year-ago period. Revenues and sales were $1,550,091,000,
up from $1,431,322,000 in 1994. Excluding the net gain from the sale of
telephone properties, net income and earnings per share rose 8 percent to
$160,120,000 and 84 cents, respectively, from the prior-year period.
Telephone, which showed a modest increase in revenues, posted solid gains
in operating income - reflecting the impact of ALLTEL's ongoing productivity
and cost-control efforts.
Cellular continues to be the primary driver of the Company's earnings
growth, with revenues and operating income up 51 percent. The first quarter
surge in sales, which temporarily reduced first quarter margins, contributed
to the strong earnings growth in the second quarter.
Information Services' results included an approximately $3 million,
one-time charge relating to a workforce reduction of 200 employees announced
in June. Excluding this one-time charge, results from operations reflect a
solid improvement over the first quarter.
ALLTEL NAMED TO FORTUNE 500
For the first time, ALLTEL is included in Fortune 500, Fortune magazine's
ranking of the largest corporations in America.
This year, the Fortune 500, which had been limited to industrial firms,
began including service companies, in recognition of the increasingly important
role these companies play in the economy.
ALLTEL ranked 384 in revenues, 216 in profits and 285 in assets. In the
area of total return to investors, the Company placed 160.
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<PAGE>
McHENRY NAMED PRESIDENT-COMMUNICATIONS SERVICES
Carroll D. McHenry has been appointed to the newly created position of
president-communication services of ALLTEL Corporation. In his new position,
McHenry - who previously served as president of ALLTEL's cellular subsidiary,
ALLTEL Mobile - is responsible for ALLTEL's communications sector business
units, including local telephone and related businesses, as well as cellular
and other wireless interests.
In a related matter, Dennis Whipple has been appointed to succeed McHenry
as president of ALLTEL Mobile.
BOARD DECLARES REGULAR QUARTERLY DIVIDENDS
ALLTEL's Board of Directors has declared regular quarterly dividends on the
Company's common stock. The 24 cent dividend is payable Oct. 3, 1995 to
stockholders of record as of Sept. 11, 1995.
Regular quarterly dividends were also declared on all series of the
Company's preferred stock. Preferred dividends are payable on Sept. 15, 1995
to stockholders of record as of Aug. 25, 1995.
/s/ Joe Ford
Joe T. Ford,
Chairman, President and Chief Executive Officer
July 20, 1995
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