SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-4996
ALLTEL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 34-0868285
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Allied Drive, Little Rock, Arkansas 72202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (501) 661-8000
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
Number of common shares outstanding as of June 30, 1996:
189,566,573
The Exhibit Index is located at sequential page 13 .
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ALLTEL CORPORATION
FORM 10-Q
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements
The following consolidated financial statements of ALLTEL
Corporation and subsidiaries, included in the interim report of ALLTEL
Corporation to its stockholders for periods ended June 30, 1996, 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, 1996 and 1995.
Consolidated Balance Sheets - June 30, 1996 and 1995 and
December 31, 1995.
Consolidated Statements of Cash Flows - for the six and twelve
months ended June 30, 1996 and 1995.
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ALLTEL CORPORATION
FORM 10-Q
PART I - FINANCIAL STATEMENTS
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's total capital structure was $3.9 billion at June 30, 1996,
reflecting 56% common and preferred equity and 44% debt. This compares to a
capital structure of $3.7 billion at December 31, 1995, reflecting 52% common
and preferred equity and 48% debt. The Company has adequate internal and
external resources available to finance its ongoing operating requirements,
including capital expenditures, business development and the payment of
dividends.
Cash provided by operations, which continues to be the Company's primary
source of liquidity, was $365.8 million and $749.8 million for the six and
twelve month periods in 1996, respectively, compared to $305.1 million and
$639.7 million for the same periods in 1995. The increases in the 1996
periods primarily reflect the growth in earnings of the Company and reduced
working capital requirements. Cash from investing activities for 1996
includes proceeds totaling $38.7 million and $166.8 million for the six month
and twelve month periods, respectively, which were received principally from
the sale of telephone properties, as discussed below. Cash from investing
activities also includes proceeds of $30.4 million related to the withdrawal
of the Company's investment in GO Communications Corporation ("GOCC"). The
Company's previously announced $32 million investment in GOCC was subject to a
number of conditions, including GOCC's ability to secure "C" band licenses in
the Personal Communications Services ("PCS") auctions conducted by the Federal
Communications Commission. Following GOCC's decision to exit the PCS
auctions, the Company elected to withdraw its investment.
The primary uses of capital resources continue to be for capital
expenditures and for the payment of dividends. Capital expenditures for the
six and twelve month periods in 1996 were $222.9 million and $466.5 million,
respectively, compared to $279.5 million and $619.2 million for the same
periods in 1995. The Company financed the majority of its capital
expenditures through the internal generation of funds in each of the past
two-year periods. Capital expenditures are forecast at $456.7 million for
1996, which are expected to be financed primarily from internally generated
funds. During each of the past two-year periods, the Company's capital
expenditures were directed toward telephone operations to continue to
modernize its network and invest in equipment to provide new
telecommunications services. In addition, capital expenditures were incurred
for expansion into existing cellular and information services markets, and to
upgrade existing cellular network facilities. Common and preferred dividend
payments for the six and twelve month periods in 1996 were $99.0 million and
$190.2 million, respectively, compared to $91.1 million and $178.0 million for
the same periods in 1995. The increases in dividend payments in the 1996
periods primarily reflect the October 1995 action of the Board of Directors to
increase the quarterly common stock dividend rate from $.24 per share to $.26
per share.
The Company has a $500 million revolving credit agreement. There were no
borrowings outstanding under this agreement at June 30, 1996, compared to
$151.5 million that was outstanding at December 31, 1995, and $168.4 million
that was outstanding at June 30, 1995.
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In March 1996, the Company issued $300 million of 7.0 percent debentures
to refinance existing high-cost indebtedness consisting of $200 million of 9.5
percent debentures. The remaining proceeds were used to reduce borrowings
under the Company's revolving credit agreement. The Company was required to
pay $15.8 million in termination fees to complete the early retirement of the
$200 million of long-term debt. The retirement of the $200 million debentures
and the reduction in revolving credit agreement borrowings represent the
majority of long-term debt retired in the six month period ended June 30, 1996.
In September 1995, the Company issued $200 million of 6.75 percent debentures
to retire $150 million of 10.375 percent debentures and $50 million of 8.875
percent debentures. In October 1995, the Company was required to pay $14.0
million in termination fees to complete the early retirement of these two debt
issues. The retirement of $200 million of debentures in March 1996, the
retirement of $200 million of long-term debt in October 1995 and the reduction
in revolving credit agreement borrowings represent the majority of long-term
debt retired in the twelve month period ended June 30, 1996. The two completed
debt refinancings are expected to produce approximately $10.5 million in annual
pre-tax interest savings.
The issuance of the $300 million of 7.0 percent debentures represent
substantially all of the long-term debt issued in the six month period ended
June 30, 1996. The $300 million debentures and the issuance of the $200
million of 6.75 percent debentures account for substantially all of the
long-term debt issued during the twelve months ended June 30, 1996.
RESULTS OF OPERATIONS
Telephone Operations
In November 1994, the Company signed definitive agreements to sell
telephone properties serving approximately 117,000 access lines in Arizona,
California, Nevada, New Mexico, Oregon, Tennessee, Utah and West Virginia to
Citizens Utilities Company ("Citizens") in exchange for approximately $250
million in cash, assumed debt and 3,600 access lines in Pennsylvania. The
sale of telephone properties represents a continuation of the Company's
ongoing efforts to achieve efficiencies and enhance the competitive position
of its telephone operations. The sale of properties in Oregon and West
Virginia was completed at the end of the second quarter of 1995, the sale of
all remaining properties except for those in Nevada was completed during the
fourth quarter of 1995, and the sale of properties in Nevada was completed
during March 1996. The sale of properties resulted in pre-tax gains of $15.3
million and $34.2 million for the six and twelve month periods ended June 30,
1996, respectively. Additionally, the sale of properties resulted in
decreases in revenues and sales of $29.0 million, $53.2 million and $78.1
million and decreases in operating income of $10.2 million, $18.0 million and
$27.4 million for the three, six and twelve month periods ended June 30, 1996,
respectively.
Telephone operations revenues and sales decreased $12.7 million or 4%,
$25.4 million or 4% and $21.4 million or 2% for the three, six and twelve
months ended June 30, 1996, respectively. Telephone operating income
decreased $4.2 million or 4%, $6.6 million or 3% and increased $3.1 million or
1% for the three, six and twelve month periods, respectively. Excluding the
impact of the sale of properties to Citizens, telephone's revenues and sales
would have increased $16.3 million, $27.8 million and $56.7 million or 5% and
operating income would have increased $6.0 million or 6%, $11.4 million or 5%
and $30.5 million or 7% for the three, six and twelve month periods ended June
30, 1996, respectively.
Local service revenue increased $1.0 million or 1%, $3.7 million or 2%
and $13.1 million or 3% in the three, six and twelve month periods,
respectively. Customer access lines, net of lines sold to Citizens, increased
nearly 5% during the past twelve month period, reflecting increased sales of
higher-margin second access lines and growth in the number of residential
lines in Ohio and Georgia. Growth in custom calling feature revenues also
contributed to the increase in revenues for all periods. The increases in
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local service revenues due to growth in customer access lines and custom
calling feature revenues were partially offset by the sale of properties to
Citizens, which reduced revenues $7.7 million, $13.8 million and $19.3 million
for the three, six and twelve month periods, respectively. There have been no
local rate increases granted to any of the Company's telephone operating
subsidiaries during 1996, and management does not anticipate filing for any
local rate increases during the remainder of 1996.
Network access and long-distance revenues decreased $11.0 million or 7%,
$24.7 million or 8% and $31.7 million or 5% for the three, six and twelve
month periods, respectively. The decreases in all periods reflect the sale of
properties to Citizens which accounted for $17.8 million, $33.3 million and
$49.9 million of the decrease in network access and long-distance revenues for
three, six and twelve month periods, respectively. The decreases in revenues
for all periods were partially offset by higher volumes of access usage. On
July 12, 1996, the Georgia Public Service Commission ("Georgia PSC") issued an
order requiring that the Company's telephone subsidiaries which operate within
its jurisdiction reduce their annual network access charges by $24 million,
prospectively. The Georgia PSC's action was in response to the Company's
election to move from a rate-of-return method of pricing to an incentive rate
structure, under Georgia's new alternative rate regulation. The Company has
requested the Georgia PSC to reconsider its order. If the Georgia PSC does not
reconsider its order, the Company will appeal the commission's decision and ask
that the order be vacated. Accordingly, the Company has not implemented any
revenue reductions at this time.
Miscellaneous revenues decreased $2.7 million or 7%, $4.4 million or 6%
and $2.8 million or 2% for the three, six and twelve month periods,
respectively. The decreases in all periods reflect the sale of properties to
Citizens which reduced revenues by $3.5 million, $6.1 million and $8.9 million
for the three, six and twelve month periods, respectively. The decreases in
revenues for all periods were partially offset by increases in directory
advertising revenues, direct sales of telephone equipment, rental revenues,
and sales of telephone equipment maintenance and protection plans.
Total telephone operating expenses decreased $8.5 million or 4%, $18.8
million or 5% and $24.5 million or 3% for the three, six and twelve month
periods, respectively. The sale of properties to Citizens accounted for $18.8
million, $35.2 million and $50.7 million of the decreases in operating
expenses for the three, six and twelve month periods, respectively. The
decreases in operating expenses for all periods resulting from the sale of
properties to Citizens were partially offset by increased expense for
maintenance and repair of cable, digital electronic switching and circuit
equipment, an increase in cost of products sold related to sales of telephone
equipment and maintenance and protection plans and increased depreciation
expense.
The decreases in telephone operating income for the three and six month
periods reflect the decreases in revenues and sales previously noted.
Although revenues and sales decreased in the twelve month period, growth in
operating income occurred primarily due to the increase in sales of
higher-margin second access lines and a reduction in accounting, financial
management and other general administrative expenses, reflecting the Company's
ongoing cost-control efforts.
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 qualified 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 would be material. Criteria
that would give rise to the discontinuance of SFAS 71 include (1) increasing
competition that restricts the telephone subsidiaries' ability to establish
prices to recover specific costs and (2) a significant change in the manner in
which rates are set by regulators from cost-based regulation to another form
of regulation. The Company periodically reviews these criteria to ensure the
continuing application of SFAS 71 is appropriate.
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Information Services
Revenues and sales for the information services segment reflect increases
of $5.6 million or 2%, $13.9 million or 3% and $47.8 million or 5% for the
three, six and twelve month periods, respectively. Operating income increased
$6.0 million or 21%, $8.5 million or 15% and $17.9 million or 15% for the
three, six and twelve month periods, respectively. Growth in revenues and
sales and operating income for the information services segment continues to
be affected by the number of mergers and consolidations taking place in the
domestic financial services and mortgage industries.
Information services revenues and sales increased in all periods
primarily due to growth in the telecommunications portion of its outsourcing
business, reflecting volume growth in existing data processing contracts and
the addition of other outsourcing contracts, including an outsourcing agreement
with Citizens. Additional software maintenance revenues, increased usage of
specialized programming service offerings and the purchase in May 1995 of
Vertex Business Systems, Inc. also contributed to the increase in revenues and
sales for all periods. Growth in revenues and sales for the twelve month
period also reflects an increase in healthcare services operations, primarily
due to an acquisition completed in November 1994 accounted for as a purchase.
The increases in revenues and sales for all periods were partially offset by
the sale of this segment's check processing operations completed in
September 1995, lost operations from contract terminations due primarily to the
merger and consolidation activity in the domestic financial services market,
and by a reduction in revenues collected for early termination of facilities
management contracts. In addition, growth in mortgage processing revenues for
all periods has been impacted by the consolidation in the mortgage industry,
which have resulted in lower revenues realized on a per loan basis. Excluding
the sale of the check processing operations, revenues and sales for this
segment would have increased 6%, 7% and 8% for the three, six and twelve months
ended June 30, 1996.
The increases in operating income for all periods reflect the increases
in revenues and sales previously discussed, partially offset by the loss of
higher margin operations due to contract terminations, reductions in fees
collected on the early termination of facilities management contracts, and an
increase in depreciation and amortization expense. Operating income was
favorably impacted for the 1996 periods due to this segment recording
approximately $3 million in severance pay costs in the second quarter of 1995.
Operating income for all periods of 1996 was also impacted by lower margins
realized on international software sales due to increased costs to procure and
support these sales. 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 the estimated net realizable
value of these operations in December 1994. The effect of this write-down is
included in the twelve months ended June 30, 1995. 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 June 1995 to
reflect the net realizable value of these operations. The effect of this
write-down is included in the three, six and twelve months ended June 30, 1995.
As previously noted, the sale of the check processing operations was
completed at the end of the third quarter of 1995.
Product Distribution Operations
Revenues and sales for the product distribution segment reflect increases
of $10.7 million or 9% and $8.9 million or 4% for the three and six month
periods, respectively. Revenues and sales for the twelve month period
decreased $1.4 million or less than 1%. Operating income decreased $0.5
million or 8%, $1.2 million or 9% and $1.0 million or 4% for the three, six
and twelve month periods, respectively.
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The increases in revenues and sales for the three and six month periods
were primarily due to an increase in retail sales of telecommunications and
data products at this segment's counter-showrooms and by increased sales of
electrical wire and cable products, reflecting increased demand for these
products. Retail sales at the counter-showrooms increased $4.9 million and
$9.0 million, while sales of electrical wire and cable products increased $5.2
million and $8.0 million for the three and six month periods of 1996,
respectively. These increases were partially offset by a decrease in sales of
telecommunications and data products to affiliates. The decrease in revenues
and sales for the twelve month period primarily resulted from a decrease in
sales to affiliates, partially offset by an increase in retail sales at the
counter-showrooms and a slight increase in the sale of electrical wire and
cable products. Sales to affiliates decreased $1.9 million, $8.3 million and
$19.2 million for the three, six and twelve month periods, respectively, as
compared to the prior-year periods. The decreases in sales to affiliates
reflect the sale of properties to Citizens, as previously discussed.
Operating income decreased in three and six month periods primarily due
to lower profit margins realized on the sale of electrical wire and cable
products. During the first six months of 1996, gross profit margins for
electrical wire and cable products have been adversely impacted by sharp
declines in copper prices, as compared to the prior-year period. The decrease
in operating income for the twelve month period primarily reflects the
decrease in revenues and sales previously discussed, and to a lesser extent,
the decreased profit margins realized on the sale of electrical wire and cable
products resulting from the overall decline in copper prices.
Cellular Operations
Cellular operations provided strong operating results which contributed
significantly to the Company's overall earnings growth. Revenues and sales
reflect increases of $15.4 million or 15%, $34.9 million or 18% and $82.1
million or 23% for the three, six and twelve month periods, respectively.
Operating income increased $6.2 million or 19%, $17.3 million or 32% and $36.6
million or 36% for the three, six and twelve month periods, respectively.
During the twelve month period ended June 30, 1996, subscriber growth remained
strong as the number of cellular customers grew to 707,643 from 568,098, an
increase of 139,545 customers or 25%.
Cellular 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.
Partially offsetting the increases in revenues and sales resulting from
subscriber growth were declines in the average monthly revenue per subscriber.
Average revenue per subscriber per month was $61, $60 and $61 for the three,
six and twelve months ended June 30, 1996, compared to $65, $64 and $66 for the
same periods in 1995. The declines in revenue per subscriber per month reflect
the industry-wide trend of increased penetration into lower-usage market
segments and reductions in roaming revenue rates. Growth in revenues and sales
in all periods was also impacted by increases in uncollectible revenues
primarily reflecting increased write-offs from bad debts and losses sustained
from fraud. Operating income increased in all periods primarily due to the
growth in revenues and sales. Improved profit margins realized on the sale of
cellular equipment also contributed to the growth in operating income for all
periods. The increases in operating income for all periods were partially
offset by higher expenses for selling and advertising, depreciation and other
operating expenses.
Other Operations
Other operations revenues and sales decreased $1.1 million or 3%, $3.6
million or 5% and $15.2 million or 10% for the three, six and twelve month
periods, respectively. Operating income increased $1.3 million or 76% and $1.4
million or 35% for the three and six month periods, respectively. Operating
income decreased $2.0 million or 19% for the twelve month period.
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Revenues and sales for other operations decreased in all periods
primarily due to a reduction in directory publishing revenues. Although the
number of directories published during the three, six and twelve month periods
of 1996 increased slightly from the prior-year periods, the average revenues
realized per published directory have declined. Compared to the prior-year
periods, average revenues realized per published directory have declined by
7%, 7% and 8% for the three, six and twelve month periods of 1996,
respectively. The declines in average revenues realized per published
directory for all periods reflect the loss of several large independent
directory contracts. Revenues and sales for the twelve month period also
decreased due to a change in accounting in late 1993 related to the
publication of directories. Concurrent with the purchase of the independent
telephone directory operations of GTE Directories Corporation ("GTE
Directories") in 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 twelve month period
ended June 30, 1995 include approximately $2.2 million of additional revenues
related to directories accounted for under the previous method. The decreases
in revenues and sales for the six and twelve month periods were partially
offset by the receipt of a one-time settlement from GTE Directories for
reimbursement of certain computer software conversion costs incurred by the
Company subsequent to its purchase of the independent telephone directory
operations.
The increase in operating income for the three month period primarily
reflects improved collection experience related to directory advertising
revenues. Compared to the second quarter of 1995, amounts charged to
uncollectible revenues in 1996 have decreased by approximately $0.5 million.
The reclassification of the Company's long-distance operations to Telephone
operations completed in April 1996, also contributed to the increase in
operating income for the three month period. This reclassification had a
positive impact on other operations' operating income due to the start-up
nature of the long-distance operations. The increase in operating income for
the six month period primarily reflects the impact of the one-time settlement
received from GTE Directories which helped to increase the gross profit margin
on published directories to 14% from 13% for the prior-year period. The
decrease in operating income for the twelve month period reflects the decrease
in revenues and sales previously noted. Operating income for the twelve month
period also reflects lower margins realized on directories published for
affiliates. The lower margins resulted from increased fees paid to affiliates
for publishing rights under the terms of a new contract that became effective
on January 1, 1995.
Corporate Operating Expenses
Corporate operating expenses decreased $2.2 million or 28% and $1.4
million or 11% for the three and six month periods, respectively, and
increased $2.9 million or 13% for the twelve month period. The decreases for
both the three and six month periods reflect a reduction in employee benefit
costs. Corporate operating expenses for the three months ended June 30, 1995,
also includes an additional $1.0 million of amortization of telephone plant
acquisition adjustments related to the Company's purchase of certain telephone
properties of GTE Corporation in the state of Georgia ("GTE Georgia").
Prior to April 1995, this amortization expense had been classified as
non-operating expense. The increase in corporate operating expenses for the
twelve month period primarily reflects the reclassification of the amortization
of telephone plant acquisition adjustments related to the GTE Georgia
acquisition. As a result of this reclassification, corporate operating
expenses for the twelve months ended June 30, 1995, do not include
approximately $2.0 million of amortization expense. The increase in corporate
operating expenses for the twelve month period also includes approximately
$1.0 million related to the amortization of excess cost of entities purchased
subsequent to April 1995.
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Other Income, Net
Other income, net increased $0.4 million and $2.2 million for the three
and twelve month periods, and decreased $0.6 million for the six month period,
respectively. The increase in the three month period was primarily due to an
increase in the equity income recognized on investments in cellular limited
partnerships and an increase in capitalized interest costs related to
long-term construction projects. These increases were partially offset by an
increase in the minority interest in earnings of the Company's cellular
operations by others. The decrease in the six month period primarily resulted
from an increase in the minority interest in earnings of the Company's cellular
operations by others, partially offset by an increase in equity income
recognized on investments in cellular limited partnerships and an increase in
capitalized interest costs related to long-term construction projects. The
increase in the twelve month period primarily reflects the reclassification to
corporate operating expenses of the amortization of telephone plant acquisition
adjustments related to the GTE Georgia acquisition, as previously discussed.
As a result of this reclassification, other income, net for the twelve months
ended June 30, 1995, includes $2.0 million of amortization expense.
Interest Expense
Interest expense decreased $5.9 million or 16%, $8.8 million or 12% and
$9.6 million or 7% for the three, six and twelve month periods, respectively.
The decreases in interest expense in all periods primarily reflects the two
debt refinancings completed in October 1995 and March 1996, which resulted in
the retirement of three high-cost debt issues and reduced borrowings under the
Company's revolving credit agreement, as previously discussed. The decreases
in interest expense for all periods also reflect decreases in the average
borrowing rates for amounts outstanding under the Company's revolving credit
agreement.
Gain on Disposal or Exchange of Assets, Write-down of Assets and Other
As previously discussed, during the first quarter of 1996, the Company
recorded a pre-tax gain of $15.3 million from the sale of telephone properties
in Nevada to Citizens. The Company also incurred $15.8 million of termination
fees related to the early retirement of $200 million of long-term debt.
Finally, the Company realized a loss of $1.8 million related to the withdrawal
of its investment in GOCC. The net income impact from these transactions
resulted in a decrease of $1.5 million in net income and $.01 in earnings per
share for the six month period ended June 30, 1996.
Including the impact of the above transactions, net income for the twelve
month period includes pre-tax gains totaling $34.2 million from the disposal
of certain telephone properties to Citizens, termination fees totaling $29.8
million related to the refinancing of long-term debt completed in October 1995
and March 1996, and the $1.8 million loss incurred on the withdrawal of an
investment. The net income impact from these transactions resulted in an
increase of $1.8 million in net income and $.01 in earnings per share for the
twelve month period ended June 30, 1996.
As previously discussed, in June 1995, the Company completed the sale of
telephone properties in Oregon and West Virginia to Citizens. This sale
resulted in a pre-tax gain of $30.9 million. In accordance with the Company's
plan for disposal of its check processing operations, the Company recorded an
additional $5.0 million pre-tax write-down in June 1995 to reflect the net
realizable value of these 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.
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The twelve month period for 1995 also includes the December 1994 pre-tax
write-down of $54.2 million recorded to reflect the estimated net realizable
value of its information services segment's community banking and check
processing operations. The net income impact from these transactions resulted
in a decrease of $15.6 million in net income and $.08 in earnings per share
for the twelve month period ended June 30, 1995.
Income Taxes
Income tax expense decreased $2.3 million or 4% for the three month
period and increased $1.5 million or 1% and $40.8 million or 23% for the six
and twelve month periods, respectively. The changes in income tax expense for
all periods of 1996 primarily reflect the tax-related impact of various
non-operating, non-extraordinary items, as previously discussed. Income tax
expense for the six and twelve month periods of 1996 includes the tax effects
of the gains on the sale of telephone properties to Citizens, offset by the
payment of termination fees related to debt refinancings and a loss incurred
on the withdrawal of an investment. Income tax expense for all periods of
1995 includes the tax effects of the gain on the sale of telephone properties
in Oregon and West Virginia to Citizens and the additional write-down of the
check processing operations. In addition, income tax expense for the twelve
months ended June 30, 1995 includes a tax benefit of approximately $22 million
resulting from the write-down of the information services operations recorded
in December 1994. Excluding the impact on tax expense of these transactions,
income tax expense would have increased $7.0 million or 14%, $11.6 million or
12% and $27.3 million or 14% for the three, six and twelve month periods,
respectively, and these increases would reflect the overall growth in the
Company's earnings from continuing operations for each of the three periods of
1996.
Net Income Applicable to Common Shares
Net income applicable to common shares decreased $6.2 million or 6% and
$0.7 million or less than 1% for the three and six month periods, respectively,
and increased $53.6 million or 18% for the twelve month period. Primary
earnings per common share decreased 8% and 1% for the three and six month
periods, respectively, and increased 17% for the twelve month period.
Excluding the net income impact in each period of the non-extraordinary items
detailed in the section entitled "Gain on Disposal or Exchange of Assets,
Write-Down of Assets and Other", net income would have increased $10.4 million
or 13%, $17.3 million or 11% and $36.1 million or 11% and primary earnings per
share would have increased 12%, 11% and 11% for the three, six and twelve
month periods ended June 30, 1996, respectively.
Average Common Shares Outstanding
The average number of common shares outstanding increased slightly for
the three, six and twelve month periods ended June 30, 1996. The increases in
all periods were primarily due to additional shares issued under the Company's
stock option plans.
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ALLTEL CORPORATION
FORM 10-Q
Part II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) See the exhibits specified on the Index of Exhibits located at
Sequential Page 13.
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the quarter for which
this report is filed.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALLTEL CORPORATION
(Registrant)
/s/ Dennis J. Ferra
Dennis J. Ferra
Senior Vice President and
Chief Financial Officer
August 13, 1996
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ALLTEL CORPORATION
FORM 10-Q
INDEX OF EXHIBITS
Form 10-Q Sequential
Exhibit No. Description Page No.
(10)(c)(6) Change in Control Agreement by and between 23 - 42
the Company and Scott T. Ford effective as
of April 25, 1996
(19) Interim Report to Stockholders and 14 - 22
Notes to Consolidated Financial Statements
for the periods ended June 30, 1996
(27) Financial Data Schedule 43
for the six months ended June 30, 1996
13
EXHIBIT 19
<TABLE>
<CAPTION>
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
1996 1995 (Decrease) 1996 1995 (Decrease) 1996 1995 (Decrease)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues and sales $804,453 $786,476 2 $1,578,719 $1,550,091 2 $3,138,353 $3,046,445 3
Net income $ 91,908 $ 98,104 (6) $ 175,981 $ 176,727 - $ 353,870 $ 300,407 18
Primary earnings per average
common share outstanding $.48 $.52 (8) $.92 $.93 (1) $1.85 $1.58 17
Excluding gain on disposal or
exchange of assets, write-down
of assets and other:
Net income $ 91,908 $ 81,497 13 $ 177,462 $ 160,120 11 $ 352,109 $ 316,023 11
Earnings per share $.48 $.43 12 $.93 $.84 11 $1.84 $1.66 11
Average common shares
including equivalents 190,720,000 189,874,000 - 190,661,000 189,948,000 - 190,413,000 189,640,000 -
Annual dividend rate
per common share $1.04 $.96 8
Total assets $5,373,846 $4,921,398 9
Telephone access lines 1,644,541 1,650,004 -
Cellular customers 707,643 568,098 25
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Business Segments (unaudited)
(Dollars in thousands)
Three Months Ended June 30, Six Months Ended June 30, Twelve Months Ended June 30,
% Increase % Increase % Increase
1996 1995 (Decrease) 1996 1995 (Decrease) 1996 1995 (Decrease)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues and Sales:
Telephone $289,836 $302,545 (4) $ 579,644 $ 605,071 (4) $1,172,246 $1,193,689 (2)
Information services 233,499 227,904 2 460,158 446,217 3 940,286 892,502 5
Product distribution 126,926 116,216 9 238,560 229,706 4 456,973 458,323 -
Cellular 118,815 103,366 15 226,968 192,085 18 433,005 350,914 23
Other operations 35,377 36,445 (3) 73,389 77,012 (5) 135,843 151,017 (10)
Total $804,453 $786,476 2 $1,578,719 $1,550,091 2 $3,138,353 $3,046,445 3
Operating Income:
Telephone $102,519 $106,672 (4) $ 207,954 $ 214,570 (3) $ 415,926 $ 412,823 1
Information services 35,081 29,040 21 65,047 56,585 15 140,505 122,624 15
Product distribution 6,662 7,208 (8) 13,121 14,343 (9) 26,116 27,109 (4)
Cellular 39,243 33,032 19 71,790 54,496 32 138,801 102,202 36
Other operations 3,094 1,755 76 5,548 4,123 35 8,465 10,415 (19)
Corporate expenses (5,709) (7,924) (28) (11,405) (12,796) (11) (25,101) (22,171) 13
Total $180,890 $169,783 7 $ 352,055 $ 331,321 6 $ 704,712 $ 653,002 8
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
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,
1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Revenues and Sales:
Service revenues $624,560 $615,156 $1,231,606 $1,205,922 $2,467,510 $2,361,186
Product sales 179,893 171,320 347,113 344,169 670,843 685,259
Total revenues and sales 804,453 786,476 1,578,719 1,550,091 3,138,353 3,046,445
Costs and Expenses:
Cost of products sold 122,719 114,826 231,186 229,895 450,410 453,369
Operations 343,625 346,690 680,042 682,480 1,350,123 1,327,934
Maintenance 37,690 36,993 74,389 74,151 148,136 152,019
Depreciation and amortization 103,546 100,557 209,538 197,031 422,306 391,490
Taxes, other than income taxes 15,983 17,627 31,509 35,213 62,666 68,631
Total costs and expenses 623,563 616,693 1,226,664 1,218,770 2,433,641 2,393,443
Operating Income 180,890 169,783 352,055 331,321 704,712 653,002
Other income, net 231 (178) 777 1,398 1,860 (326)
Interest expense (31,989) (37,896) (66,199) (75,028) (136,599) (146,153)
Gain on disposal or exchange of assets,
write-down of assets and other - 25,927 (2,278) 25,927 2,570 (28,230)
Income before income taxes 149,132 157,636 284,355 283,618 572,543 478,293
Federal and state income taxes 57,224 59,532 108,374 106,891 218,673 177,886
Net income 91,908 98,104 175,981 176,727 353,870 300,407
Preferred dividends 274 279 548 596 1,110 1,201
Net income applicable to common shares $ 91,634 $ 97,825 $ 175,433 $ 176,131 $ 352,760 $ 299,206
Primary Earnings per Share $.48 $.52 $.92 $.93 $1.85 $1.58
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows (unaudited)
(Dollars in thousands)
Six Months Twelve Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Cash Provided by Operations $365,791 $305,149 $749,828 $639,682
Cash Flows from Investing Activities:
Additions to property, plant and equipment (222,911) (279,451) (466,524) (619,203)
Sale of property 38,687 84,828 166,770 84,828
Additions to capitalized software
development costs (30,526) (24,218) (58,616) (37,210)
Investments sold (acquired) 20,102 (17,276) 3,649 (25,064)
Other, net (9,931) (3,359) (78,591) (24,183)
Net cash used in investing activities (204,579) (239,476) (433,312) (620,832)
Cash Flows from Financing Activities:
Dividends on preferred and common stock (99,019) (91,122) (190,167) (177,962)
Reductions in long-term debt (369,795) (32,874) (614,557) (45,272)
Long-term debt issued 313,682 36,385 495,461 175,415
Common stock issued 3,625 9,192 11,658 22,925
Other, net (686) (381) (1,442) (11,824)
Net cash used in financing activities (152,193) (78,800) (299,047) (36,718)
Increase (decrease) in cash and
short-term investments 9,019 (13,127) 17,469 (17,868)
Cash and Short-term Investments:
Beginning of period 21,421 26,098 12,971 30,839
End of period $ 30,440 $ 12,971 $ 30,440 $ 12,971
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets (unaudited)
Assets (Dollars in thousands)
June 30, Dec. 31, June 30,
1996 1995 1995
<S> <C> <C> <C>
Current Assets:
Cash and short-term investments $ 30,440 $ 21,421 $ 12,971
Accounts receivable (less allowance for
doubtful accounts of $19,054, $18,439
and $22,250, respectively) 552,811 582,797 549,342
Materials and supplies 21,040 22,191 28,998
Inventories 88,394 89,667 89,229
Prepaid expenses 24,806 15,165 21,827
Total current assets 717,491 731,241 702,367
Investments 859,391 611,706 444,645
Excess of cost over equity in purchased entities 480,933 480,070 496,676
Property, Plant and Equipment:
Telephone 3,682,361 3,733,468 3,726,433
Information services 491,286 468,648 405,448
Cellular 506,953 462,397 399,326
Other 27,081 28,965 30,408
Under construction 213,456 148,349 264,120
Total property, plant and equipment 4,921,137 4,841,827 4,825,735
Less accumulated depreciation 1,939,946 1,869,075 1,823,930
Net property, plant and equipment 2,981,191 2,972,752 3,001,805
Other assets 334,840 277,336 275,905
Total Assets $5,373,846 $5,073,105 $4,921,398
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Liabilities and Shareholders' Equity
June 30, Dec. 31, June 30,
1996 1995 1995
<S> <C> <C> <C>
Current Liabilities:
Current maturities of long-term debt $ 36,967 $ 36,892 $ 38,722
Accounts payable 204,870 213,944 226,939
Advance payments and customers' deposits 76,490 73,660 63,049
Accrued taxes 50,101 58,341 57,528
Accrued dividends 49,424 49,149 45,195
Other current liabilities 111,893 137,298 139,128
Total current liabilities 529,745 569,284 570,561
Deferred Credits:
Investment tax 18,742 21,821 26,556
Income taxes 702,084 544,435 452,612
Total deferred credits 720,826 566,256 479,168
Long-term debt 1,695,068 1,761,604 1,836,197
Other liabilities 247,186 233,318 248,270
Preferred stock, redeemable 6,508 7,078 7,513
Shareholders' Equity:
Preferred stock 9,223 9,241 9,287
Common stock 189,567 189,268 188,887
Additional capital 359,074 355,663 347,698
Unrealized holding gain on investments 367,242 208,681 144,039
Retained earnings 1,249,407 1,172,712 1,089,778
Total shareholders' equity 2,174,513 1,935,565 1,779,689
Total Liabilities and Shareholders' Equity $5,373,846 $5,073,105 $4,921,398
</TABLE>
19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL STATEMENT PRESENTATION:
The consolidated financial statements at June 30, 1996 and 1995 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.
20
<PAGE>
To ALLTEL Stockholders:
ALLTEL Corporation recently announced its financial results for the period
ended June 30, 1996.
Second quarter earnings per share from operations were 48 cents, compared
with 43 cents per share a year ago, a 12 percent increase. Net income from
operations for the second quarter of 1996 was $91,908,000, compared with
$81,497,000 in the second quarter of 1995, an increase of 13 percent. Revenues
and sales were $804,453,000, up from $786,476,000 in the corresponding quarter
of 1995.
Earnings per share from operations for the six months ended June 30, 1996
were 93 cents compared to 84 cents a year ago - an 11 percent increase, while
net income from operations was $177,462,000, also up 11 percent from
$160,120,000 in the year-ago period. Revenues and sales were $1,578,719,000, up
from $1,550,091,000 in 1995.
Including one-time items, second quarter 1995 earnings per share and net
income were 52 cents and $98,104,000, respectively. Earnings per share and net
income for the six months ended June 30, 1996 were 92 cents and $175,981,000,
compared to 93 cents and $176,727,000, respectively, in the first six months
of 1995.
The six-month results for 1996 include debt refinancing costs partially
offset by a gain on the sale of telephone properties. The second quarter and
six-month results for 1995 include a net after-tax gain of $17 million or 9
cents per share primarily resulting from the sale of several telephone
properties offset by the write-down on information services' check processing
operations.
Solid performance by telephone, double-digit results from cellular and
cost improvements at information services produced another quarter of
double-digit growth in earnings per share from continuing operations. Reduced
interest costs - the result of the Company's debt refinancing efforts - also
contributed to the quarter's strong earnings growth.
As expected, telephone's reported results reflected the earlier sale of
several properties. Telephone posted solid access line growth and strong
productivity gains.
Cellular was the primary driver of earnings growth in the second quarter.
Revenues and operating income results reflected a continued focus on attracting
and retaining quality customers, while implementing measures designed to reduce
bad debt and fraud.
Information services' second quarter revenue growth remained modest - the
result of continued soft sales. Operating income growth was strong, reflecting
the effects of continued cost control measures.
21
<PAGE>
ALLTEL to Offer Integrated Package of Communication Services in Little Rock
ALLTEL recently announced plans to provide a comprehensive range of
communications services, including local and long-distance service, cellular
service, Internet access, network management and other services, to Little
Rock, Ark., over the next 12-14 months.
This represents the first market where ALLTEL will offer an integrated
package of services beyond its traditional local telephone franchise area.
Additional markets are under evaluation.
Changes in technology and regulation have made it possible for the Company
to bring new services to new markets, as well as to offer additional services
to existing markets. ALLTEL plans to be an aggressive competitor in those areas
where the Company has good market leverage or where good business opportunities
exist.
Company Signs International Telecommunications Outsourcing Contract
ALLTEL Information Services recently signed its first international
telecommunications outsourcing contract in the Asia-Pacific Region. Under terms
of the 10-year agreement, ALLTEL will provide software and full outsourcing
services to support the Pilipino Telephone Corporation (Pitel) - the second
largest telecommunications company in the Philippines. ALLTEL will provide
Pitel with a full array of outsourcing services - including software
conversion, data center management, network monitoring and management, billing
and customer care services, application processing and maintenance and disaster
recovery services. In addition, Pitel will license ALLTEL's proprietary
Virtuoso cellular billing and customer care software.
Board Declares Dividends
ALLTEL Corporation's Board of Directors declared regular quarterly dividends
on the Company's common stock. The 26 cent dividend is payable Oct. 3, 1996 to
stockholders of record as of Sept. 9, 1996.
Regular quarterly dividends were also declared on all series of the
Company's preferred stock. Preferred dividends are payable Sept. 15, 1996 to
stockholders of record as of Aug. 23, 1996.
/s/ Joe Ford
Joe T. Ford,
Chairman, President and Chief Executive Officer
July 25, 1996
22
AGREEMENT
This Agreement, dated April 25, 1996, is made by and between ALLTEL
Corporation, a Delaware corporation (as hereinafter defined, the
"Corporation"), and Scott T. Ford (as hereinafter defined, the "Executive").
WHEREAS, the Board of Directors of the Corporation (as hereinafter
defined, the "Board") recognizes that the possibility of a Change in Control
(as hereinafter defined) of the Corporation exists and that such possibility,
and the uncertainty it may cause, may result in the departure or distraction
of key management employees of the Corporation or of a Subsidiary to the
detriment of the Corporation and its stockholders; and
WHEREAS, the Executive is a key management employee of the Corporation or
of a Subsidiary; and
WHEREAS, the Board has determined that the Corporation should encourage
the continued employment of the Executive by the Corporation or a Subsidiary
and the continued dedication of the Executive to his assigned duties without
distraction as a result of the circumstances arising from the possibility of a
Change in Control;
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Corporation and the Executive hereby agree as follows:
1. Defined Terms. For purposes of this Agreement, the following
terms shall have the meanings indicated below:
(A) "Board" shall mean the Board of Directors of the
Corporation, as constituted from time to time.
(B) "Cause" for termination by the Corporation of the
Executive's employment shall mean (i) the willful failure by the Executive
substantially to perform the Executive's duties with the Corporation or a
Subsidiary, other than any failure resulting from the Executive's incapacity
due to physical or mental illness or any actual or anticipated failure after
the issuance of a Notice of Termination for Good Reason by the Executive in
23
<PAGE>
accordance with paragraph (A) of Section 6, that continues for at least 30
days after the Board delivers to the Executive a written demand for
performance that identifies specifically and in detail the manner in which the
Board believes that the Executive willfully has failed substantially to
perform the Executive's duties or (ii) the willful engaging by the Executive
in misconduct that is demonstrably and materially injurious to the Corporation
or any Subsidiary, monetarily or otherwise. For purposes of this definition,
no act, or failure to act, on the Executive's part shall be deemed "willful"
unless done, or omitted to be done, by the Executive not in good faith and
without reasonable belief that the Executive's act, or failure to act, was in
the best interest of the Corporation and its Subsidiaries:
(C) A "Change in Control" shall mean, if subsequent to the
date of this Agreement:
(i) Any "person," as defined in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), other
than the Corporation, any of its subsidiaries, or any employee benefit
plan maintained by the Corporation 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 Corporation, 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 Corporation or (B) more than 50%
of the outstanding voting capital stock of the Corporation, 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 Corporation; or
(iii) A record date is fixed for determining stockholders
entitled to vote upon (A) a merger or consolidation of the Corporation,
24
<PAGE>
statutory share exchange, or other similar transaction with another
corporation, partnership, or other entity or enterprise in which either
the Corporation is not the surviving or continuing corporation or shares
of common stock of the Corporation are to be converted into or exchanged
for cash, securities other than common stock of the Corporation, or other
property, (B) a sale or disposition of all or substantially all of the
assets of the Corporation, or (C) the dissolution of the Corporation; or
(iv) The Corporation 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 of this paragraph (C).
(D) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(E) "Continuing Directors" means directors who were directors
of the Corporation at the beginning of the 24-month period ending on the date
the determination is made or whose election, or nomination for election by the
Corporation'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 (i) were directors at the beginning of the period, or (ii) 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.
(F) "Corporation" shall mean ALLTEL Corporation and any
successor to its business or assets, by operation of law or otherwise.
(G) "Date of Termination" shall have the meaning stated in
paragraph (B) of Section 6 hereof.
(H) "Disability" shall be deemed the reason for the
termination by the Corporation of the Executive's employment, if, as a result
of the Executive's incapacity due to physical or mental illness, the
Executive shall have been absent from the full-time performance of the
25
<PAGE>
Executive's duties with the Corporation or a Subsidiary for a period of six
consecutive months, the Corporation shall have given the Executive a Notice of
Termination for Disability, and, within 20 business days after the Notice of
Termination is given, the Executive shall not have returned to the full-time
performance of the Executive's duties.
(I) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(J) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence, without the Executive's
express written consent, of any one of the following:
(i) the assignment to the Executive of any duties inconsistent
with the Executive's status as an executive officer of the Corporation or
of a Subsidiary or a substantial adverse alteration in the nature or
status of the Executive's responsibilities from those in effect
immediately prior to the Change in Control;
(ii) a reduction by the Corporation in the Executive's annual
base salary to any amount less than the Executive's annual base salary as
in effect immediately prior to the Change in Control;
(iii) the relocation of the principal executive offices of the
Corporation or of a Subsidiary, as the case may be, to a location more
than 35 miles from the location of such offices immediately prior to the
Change in Control or the Corporation's requiring the Executive to be
based anywhere other than the principal executive offices of the
Corporation or of a Subsidiary as the case may be, except for required
business travel to an extent substantially consistent with the Executive's
business travel obligations immediately prior to the Change in Control;
(iv) the failure by the Corporation to pay to the Executive
any portion of the Executive's current compensation, or to pay to the
Executive any deferred compensation under any deferred compensation
26
<PAGE>
program of the Corporation, within five days after the date the
compensation is due or to pay or reimburse the Executive for any expenses
incurred by him for required business travel;
(v) the failure by the Corporation to continue in effect any
compensation plan in which the Executive participates immediately prior to
the Change in Control that is material to the Executive's total
compensation, including but not limited to, stock option, restricted
stock, stock appreciation right, incentive compensation, bonus, and other
plans, unless an equitable alternative arrangement embodied in an ongoing
substitute or alternative plan has been made, or the failure by the
Corporation to continue the Executive's participation therein (or in a
substitute or alternative plan) on a basis not materially less favorable,
both in terms of the amount of compensation provided and the level of the
Executive's participation relative to other participants, than existed
immediately prior to the Change in Control;
(vi) the failure by the Corporation to continue to provide the
Executive with benefits substantially similar to those enjoyed by the
Executive under any of the Corporation's pension, profit-sharing, life
insurance, medical, health and accident, disability, or other employee
benefit plans in which the Executive was participating immediately prior
to the Change in Control; the failure by the Corporation to continue to
provide the Executive any material fringe benefit or perquisite enjoyed
by the Executive immediately prior to the Change in Control; or the
failure by the Corporation to provide the Executive with the number of
paid vacation days to which the Executive is entitled in accordance with
the Corporation's normal vacation policy in effect immediately prior to
the Change in Control; or
(vii) any purported termination by the Corporation of the
Executive's employment that is not effected in accordance with a Notice
27
<PAGE>
of Termination satisfying the requirements of paragraph (A) of Section 6
hereof.
(K) "Notice of Termination" shall have the meaning stated in
paragraph (A) of Section 6 hereof.
(L) "Payment Trigger" shall mean the occurrence of a Change in
Control during the term of this Agreement coincident with or followed (i) at
any time before the end of the 12th month immediately following the month in
which the Change in Control occurred, by the termination of the Executive's
employment with the Corporation or a Subsidiary for any reason other than (A)
by the Executive without Good Reason, (B) by the Corporation as a result of the
Disability of the Executive or with Cause or, (C) as a result of the death of
the Executive or (ii) in the event the Executive remains continuously employed
by the Corporation or a Subsidiary until the end of the 12th month immediately
following the month in which the Change in Control occurred, the termination of
the Executive's employment with the Corporation or a Subsidiary, at any time
during the three month period immediately following the expiration of such
12-month period, for any reason other than (A) by the Corporation as a result
of the Disability of the Executive or (B) as a result of the death of the
Executive.
(M) "Person" shall have the meaning given in Section 3(a)(9)
of the Securities Exchange Act of 1934, as amended from time to time, as
modified and used in Sections 13(d) and 14(d) thereof; except that, a Person
shall not include (i) the Corporation or any Subsidiary, (ii) a trustee or
other fiduciary holding securities under an employee benefit plan of the
Corporation or any Subsidiary, or (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities.
(N) "Subsidiary" shall mean any corporation or other entity
or enterprise, whether incorporated or unincorporated, of which at least a
majority of the securities or other interests having by their terms ordinary
voting power to elect a majority of the board of directors or others serving
similar functions with respect to such corporation or other entity or
28
<PAGE>
enterprise is owned by the Corporation or other entity or enterprise of which
the Corporation directly or indirectly owns securities or other interests
having all the voting power.
2. Term of Agreement. This Agreement shall become effective on
the date hereof and, subject to the second sentence of this Section 2, shall
continue in effect until the earliest of (i) a Date of Termination in
accordance with Section 6 or the death of the Executive shall have occurred
prior to a Change in Control, (ii) if a Payment Trigger shall have occurred
during the term of this Agreement, the performance by the Corporation of all
its obligations, and the satisfaction by the Corporation of all its obligations
and liabilities, under this Agreement, (iii) the ten year anniversary of the
date of this Agreement if, as of that ten year anniversary, a Change in Control
shall not have occurred and be continuing, or (iv) in the event, as of the ten
year anniversary of the date of this Agreement, a Change in Control shall have
occurred and be continuing, either the expiration of such period thereafter
within which a Payment Trigger does not or can not occur or the ensuing
occurrence of a Payment Trigger and the performance by the Corporation of all
of its obligations and liabilities under this Agreement. Any Change in Control
during the term of this Agreement that for any reason ceases to constitute a
Change in Control or is not followed by a Payment Trigger shall not effect a
termination or lapse of this Agreement. Any transfer of the Executive's
employment from the Corporation to a Subsidiary, from a Subsidiary to the
Corporation, or from one Subsidiary to another Subsidiary shall not constitute
a termination of the Executive's employment for purposes of this Agreement.
3. General Provisions.
(A) The Corporation hereby represents and warrants to the
Executive as follows: The execution and delivery of this Agreement and the
performance by the Corporation of the actions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the
Corporation. This Agreement is a legal, valid and legally binding obligation
of the Corporation enforceable in accordance with its terms. Neither the
execution or delivery of this Agreement nor the consummation by the Corporation
29
<PAGE>
of the actions contemplated hereby (i) will violate any provision of the
certificate of incorporation or bylaws (or other charter documents) of the
Corporation, (ii) will violate or be in conflict with any applicable law or any
judgment, decree, injunction or order of any court or governmental agency or
authority, or (iii) will violate or conflict with or constitute a default
(or an event of which, with notice or lapse of time or both, would constitute
a default) under or will result in the termination of, accelerate the
performance required by, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the assets or properties of the
Corporation under, any term or provision of the certificate of incorporation
or bylaws (or other charter documents) of the Corporation or of any contract,
commitment, understanding, arrangement, agreement or restriction of any kind
or character to which the Corporation is a party or by which the Corporation
or any of its properties or assets may be bound or affected.
(B) No amount or benefit shall be payable under this Agreement
unless there shall have occurred a Payment Trigger during the term of this
Agreement. In no event shall payments in accordance with this Agreement be
made in respect of more than one Payment Trigger.
(C) This Agreement shall not be construed as creating an
express or implied contract of employment and, except as otherwise agreed in
writing between the Executive and the Corporation, the Executive shall not have
any right to be retained in the employ of the Corporation or of a Subsidiary.
Notwithstanding the immediately preceding sentence or any other provision of
this Agreement, no purported termination of the Executive's employment that is
not effected in accordance with a Notice of Termination satisfying paragraph
(A) of Section 6 shall be effective for purposes of this Agreement. The
Executive's right, following the occurrence of a Change in Control, to
terminate his employment under this Agreement for Good Reason shall not be
affected by the Executive's Disability or incapacity. The Executive's
continued employment shall not constitute consent to, or a waiver of rights
with respect to, any act or failure to act constituting Good Reason under this
Agreement.
30
<PAGE>
4. Payments Due Upon a Payment Trigger.
(A) The Corporation shall pay to the Executive the payments
described in this Section 4 upon the occurrence of a Payment Trigger during
the term of this Agreement.
(B) Upon the occurrence of a Payment Trigger during the term
of this Agreement, the Corporation shall pay to the Executive a lump sum
payment, in cash, equal to the product of:
(i) three multiplied by
(ii) the sum of --
(a) the higher of the Executive's annual base salary in effect
immediately prior to the occurrence of the Change in Control or the
Executive's annual base salary in effect immediately prior to the
Payment Trigger, plus
(b) the higher of the aggregate maximum amounts payable to the
Executive pursuant to all incentive compensation plans for the
fiscal year or other measuring period commencing coincident with or
most recently prior to the date on which the Change in Control
occurs or the aggregate maximum amounts payable to the Executive
pursuant to all incentive compensation plans for the fiscal year or
other measuring period commencing coincident with or most recently
prior to the date on which the Payment Trigger occurs, in each case,
assuming that the Executive were continuously employed by the
Corporation or a Subsidiary on the terms and conditions, including,
without limitation, the terms of the incentive plans, in effect
immediately prior to the Change in Control or Payment Trigger,
whichever applies, until the last day of that fiscal year or other
measuring period.
31
<PAGE>
The amount determined under the foregoing provisions of this paragraph (B)
shall be reduced by any cash severance benefit otherwise paid to the Executive
under any applicable severance plan or other severance arrangement. For
purposes of this paragraph (B), amounts payable to the Executive pursuant to
an incentive compensation plan for the fiscal year or other measuring period
commencing coincident with or most recently prior to the date on which the
Change of Control or Payment Trigger, as applicable, occurs (the "applicable
year/period") shall not include amounts attributable to a fiscal year or other
measuring period that commenced prior to the applicable year/period and that
become payable during the applicable year/period. For purposes of this
paragraph (B), incentive compensation plans shall include, without limitation,
the ALLTEL Corporation Performance Incentive Compensation Plan as in effect
from time to time, the ALLTEL Corporation Long-Term Performance Incentive
Compensation Plan as in effect from time to time, and any incentive bonus plan
or arrangement that provides for payment of cash compensation, and shall
exclude, without limitation, the ALLTEL Corporation Executive Deferred
Compensation Plan as in effect from time to time, any plan qualified or
intended to be qualified under Section 401(a) of the Code and any plan
supplementary thereto, executive fringe benefits, and any plan or arrangement
under which stock, stock options, stock appreciation rights, restricted stock
or similar options, stock, or rights are issued.
(C) Notwithstanding any provision of any incentive
compensation plan, including, without limitation, any provision of any
incentive plan requiring continued employment after the completed fiscal year
or other measuring period, the Corporation shall pay to the Executive a lump
sum amount, in cash, equal to the amount of any incentive compensation that
has been allocated or awarded to the Executive for a completed fiscal year or
other measuring period preceding the occurrence of a Payment Trigger under any
incentive compensation plan but has not yet been paid to the Executive.
(D) The payments provided for in paragraphs (B) and (C) of
this Section 4 shall be made not later than the fifth day following the
occurrence of a Payment Trigger, unless the amounts of such payments cannot be
finally determined on or before that day, in which case, the Corporation shall
32
<PAGE>
pay to the Executive on that day an estimate, as reasonably determined in good
faith by the Corporation, of the minimum amount of the payments to which the
Executive is clearly entitled and shall pay the remainder of the payments
(together with interest at the rate provided in Section 1274(b)(2)(B) of
the Code) as soon as the amount thereof can be determined but in no event later
than the thirtieth day after the occurrence of a Payment Trigger. In the event
the amount of the estimated payments exceeds the amount subsequently determined
to have been due, the excess shall constitute a loan by the Corporation to the
Executive, payable on the fifth business day after demand by the Corporation
(together with interest at the rate provided in Section l274(b)(2)(B) of the
Code). At the time that payments are made under this Section 4, the
Corporation shall provide the Executive with a written statement setting forth
the manner in which the payments were calculated and the basis for the
calculations including, without limitation, any opinions or other advice the
Corporation has received from outside counsel, auditors or consultants (and any
opinions or advice that are in writing shall be attached to the statement).
5. Gross-Up Payments.
(A) This Section 5 shall apply if a Payment Trigger shall
have occurred during the term of this Agreement.
(B) In the event it shall be determined that any payment or
distribution by the Corporation or other amount with respect to the Corporation
to or for the benefit of the Executive, whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 5 (a "Payment"), is (or will be) subject to the excise tax imposed by
Section 4999 of the Code or any interest or penalties are (or will be) incurred
by the Executive with respect to the excise tax imposed by Section 4999 of the
Code with respect to the Corporation (the excise tax, together with any
interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), the Executive shall be entitled to receive an additional cash
payment (a "Gross-Up Payment") from the Corporation in an amount equal to the
33
<PAGE>
sum of the Excise Tax and an amount sufficient to pay the cumulative Excise Tax
and all cumulative income taxes (including any interest and penalties imposed
with respect to such taxes) relating to the Gross-Up Payment so that the net
amount retained by the Executive is equal to all payments received pursuant to
the terms of this Agreement or otherwise less income taxes (but not reduced by
the Excise Tax).
(C) Subject to the provisions of paragraph (D) of this
Section 5, all determinations required to be made under this Section 5,
including whether and when a Gross-Up Payment is required and the amount of
such Gross-Up Payment and the assumptions to be utilized in arriving at the
determination, shall be made by a nationally recognized certified public
accounting firm designated by the Executive (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Corporation and the
Executive within 30 days after the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested by the
Corporation. In the event that at any time relevant to this Agreement the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group or Person effecting the Change in Control, the Executive shall
appoint another nationally recognized certified public accounting firm to make
the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Corporation. Any Gross-Up
Payment, as determined in accordance with this Section 5, shall be paid by the
Corporation to the Executive within five days after the receipt of the
Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Executive, it shall so indicate to the Executive
in writing. Any determination by the Accounting Firm shall be binding upon
the Corporation and the Executive. As a result of uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm, it is possible that Gross-Up Payments
that the Corporation should have made will not have been made (an
"Underpayment"), consistent with the calculations required to be made
hereunder. In the event the Corporation exhausts its remedies in accordance
34
<PAGE>
with paragraph (D) of this Section 5 and the Executive thereafter is required
to make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of Underpayment that has occurred and the Underpayment shall be
promptly paid by the Corporation to or for the benefit of the Executive.
(D) The Executive shall notify the Corporation in writing of
any claim by the Internal Revenue Service that, if successful, would require
a Gross-Up Payment (that has not already been paid by the Corporation).
The notification shall be given as soon as practicable but no later than ten
business days after the Executive is informed in writing of the claim and shall
apprise the Corporation of the nature of the claim and the date on which the
claim is requested to be paid. The Executive shall not pay the claim prior to
the expiration of the 30-day period following the date on which the Executive
gives notice to the Corporation or any shorter period ending on the date that
any payment of taxes with respect to the claim is due. If the Corporation
notifies the Executive in writing prior to the expiration of the 30-day period
that it desires to contest the claim, the Executive shall:
(i) give the Corporation any information reasonably requested
by the Corporation relating to the claim;
(ii) take any action in connection with contesting the claim as
the Corporation shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect
to the claim by an attorney reasonably selected by the Corporation;
(iii) cooperate with the Corporation in good faith in order
effectively to contest the claim; and
(iv) permit the Corporation to participate in any proceedings
relating to the claim.
The Corporation shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with the contest and
shall indemnify and hold the Executive harmless, on an after-tax basis, for
35
<PAGE>
any Excise Tax or income tax (including interest and penalties with respect
thereto) imposed as a result of the representation and payment of costs and
expenses. Without limitation of the foregoing provisions of this Section 5,
the Corporation shall control all proceedings taken in connection with the
contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings, and conferences with the taxing
authority in respect of the claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute the contest
to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Corporation shall
determine. If the Corporation directs the Executive to pay the claim and sue
for a refund, the Corporation shall advance the amount of the payment to the
Executive, on an interest-free basis, and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
the advance or with respect to any imputed income with respect to the advance;
and any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which the contested
amount is claimed to be due shall be limited solely to the contested amount.
The Corporation's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(E) If, after the receipt by the Executive of an amount
advanced by the Corporation pursuant to paragraph (D) of this Section 5, the
Executive becomes entitled to receive any refund with respect to the claim, the
Executive shall, subject to the Corporation's compliance with the requirements
of paragraph (D) of this Section 5, promptly pay to the Corporation the amount
of the refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Corporation pursuant to paragraph (D) of this Section 5, a
36
<PAGE>
determination is made that the Executive shall not be entitled to any refund
with respect to the claim and the Corporation does not notify the Executive
in writing of its intent to contest the denial of refund prior to the
expiration of 30 days after the determination, then the advance shall be
forgiven and shall not be required to be repaid and the amount of the advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required
to be paid.
6. Termination Procedures.
(A) During the term of this Agreement, any purported
termination of the Executive's employment (other than by reason of death) shall
be communicated by written Notice of Termination from one party hereto to the
other party hereto in accordance with Section 10 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a written notice that indicates
the specific termination provision in this Agreement relied upon, and, if
applicable, the notice shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. Further, a Notice of Termination
for Cause shall include a copy of a resolution duly adopted by the affirmative
vote of not less than a majority of the entire membership of the Board at a
meeting of the Board that was called and held for the purpose of considering
the termination finding that, in the informed, reasonable, good faith judgment
of the Board, the Executive was guilty of conduct set forth in the definition
of Cause in Section 1(B), and specifying the particulars thereof in detail.
(B) "Date of Termination" with respect to any purported
termination of the Executive's employment during the term of this Agreement
(other than by reason of death) shall mean (i) if the Executive's employment is
terminated for Disability, 20 business days after Notice of Termination is
given (provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during that 20 business day period) and
(ii) if the Executive's employment is terminated for any other reason, the date
specified in the Notice of Termination, which, in the case of a termination by
the Corporation, shall not be less than ten business days except in the case of
37
<PAGE>
a termination for Cause, and, in the case of a termination by the Executive,
shall not be less than ten business days nor more than 20 business days,
respectively, after the date such Notice of Termination is given.
7. No Mitigation. The Executive shall not be required to seek
other employment or to attempt in any way to reduce any amounts payable to the
Executive by the Corporation pursuant to this Agreement. Further, the amount
of any payment or benefit provided for in this Agreement shall not be reduced
by any compensation earned by the Executive as the result of employment by
another employer, by retirement benefits, by offset against any amount claimed
to be owed by the Executive to the Corporation or a Subsidiary, or otherwise.
8. Disputes.
(A) If a dispute or controversy arises out of or in connection
with this Agreement, the parties shall first attempt in good faith to settle
the dispute or controversy by mediation under the Commercial Mediation Rules
of the American Arbitration Association before resorting to arbitration or
litigation. Thereafter, any remaining unresolved dispute or controversy
arising out of or in connection with this Agreement shall, upon a written
notice from the Executive to the Corporation either before suit thereupon is
filed or within 20 business days thereafter, be settled exclusively by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association in a city located within the continental United States
designated by the Executive. Judgment may be entered on the arbitrator's award
in any court having jurisdiction. The Executive shall, however, be entitled to
seek specific performance of the Corporation's obligations hereunder during the
pendency of any dispute or controversy arising under or in connection with this
Agreement.
(B) Any legal action concerning this Agreement, other than a
mediation or an arbitration described in paragraph (A) of this Section 8,
whether instituted by the Corporation or the Executive, shall be brought and
resolved only in a state court of competent jurisdiction located in the
territory that encompasses the city, county, or parish in which the Executive's
38
<PAGE>
principal residence is located at the time such action is commenced. The
Corporation hereby irrevocably consents and submits to and shall take any
action necessary to subject itself to the personal jurisdiction of that court
and hereby irrevocably agrees that all claims in respect of the action shall
be instituted, heard, and determined in that court. The Corporation agrees that
such court is a convenient forum, and hereby irrevocably waives, to the fullest
extent it may effectively do so, the defense of an inconvenient forum to the
maintenance of the action. Any final judgment in the action may be enforced
in other jurisdictions by suit on the judgment or in any other manner provided
by law.
(C) The Corporation shall pay all costs and expenses,
including attorneys' fees and disbursements, of the Corporation and, at least
monthly, the Executive in connection with any legal proceeding (including
arbitration), whether or not instituted by the Corporation or the Executive,
relating to the interpretation or enforcement of any provision of this
Agreement, provided that if the Executive instituted the proceeding and the
judge, arbitrator, or other individual presiding over the proceeding
affirmatively finds that the Executive instituted the proceeding in bad faith,
the Executive shall pay all costs and expenses, including attorney's fees and
disbursements, of Executive and the Corporation. The Corporation shall pay
prejudgment interest on any money judgment obtained by Executive as a result
of such proceeding, calculated at the rate provided in Section 1274(b)(2)(B)
of the Code.
9. Successors; Binding Agreement.
(A) In addition to any obligations imposed by law upon any
successor to the Corporation, the Corporation shall require any successor
(whether direct or indirect, by purchase, merger, consolidation, or otherwise)
to all or substantially all of the business or assets of the Corporation
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent that the Corporation would be required to perform it if no
such succession had taken place. Failure of the Corporation to obtain the
assumption and agreement prior to the effectiveness of any succession shall be
39
<PAGE>
a breach of this Agreement and shall entitle the Executive to compensation from
the Corporation in the same amount and on the same terms as the Executive would
be entitled to hereunder if the Executive were to terminate his employment for
Good Reason immediately after a Change in Control and during the term of this
Agreement, except that, for purposes of implementing the foregoing, the date on
which any succession becomes effective shall be deemed the Payment Trigger
occasioned by the foregoing deemed termination of employment for Good Reason
immediately following a Change in Control. The provisions of this Section 9
shall continue to apply to each subsequent employer of Executive bound by this
Agreement in the event of any merger, consolidation, or transfer of all or
substantially all of the business or assets of that subsequent employer.
(B) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees, and legatees. If
the Executive shall die while any amount would be payable to the Executive
hereunder (other than amounts which, by their terms, terminate upon the death
of the Executive) if the Executive had continued to live, the amount, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the executors, personal representatives, or administrators of the
Executive's estate.
10. Notices. For the purpose of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed
to the respective addresses set forth below, or to such other address as
either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
actual receipt:
40
<PAGE>
To the Corporation:
ALLTEL Corporation
One Allied Drive
Little Rock, Arkansas 72202
Attention: Chairman of the Board
To the Executive:
Scott T. Ford
22311 Highway 10
Little Rock, Arkansas 72212-9622
11. Miscellaneous. No provision of this Agreement may be
modified, waived, or discharged unless such waiver, modification, or discharge
is agreed to in writing and signed by the Executive and an officer of the
Corporation specifically designated by the Board. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly
set forth in this Agreement. The validity, interpretation, construction, and
performance of this Agreement shall be governed by the laws of the State of
Delaware. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any
payments provided for hereunder shall be paid net of any applicable
withholding required under federal, state, or local law and any additional
withholding to which the Executive has agreed.
12. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
41
<PAGE>
IN WITNESS WHEREOF, the parties have signed this Agreement as of
the date set forth above.
ALLTEL CORPORATION
Attest:
/s/ John L. Comparin By /s/ Joe T. Ford
Name: John L. Comparin Name: Joe T. Ford
Title: VP-Human Resources & Title: Chairman & CEO
Administration
Witness:
/s/ Kathy McCormick /s/ Scott T. Ford
Kathy McCormick Scott T. Ford
42
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SECOND
QUARTER REPORT TO STOCKHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH REPORT.
</LEGEND>
<CIK> 0000065873
<NAME> ALLTEL CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
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<SECURITIES> 0
<RECEIVABLES> 552,811
<ALLOWANCES> 19,054
<INVENTORY> 88,394
<CURRENT-ASSETS> 717,491
<PP&E> 4,921,137
<DEPRECIATION> 1,939,946
<TOTAL-ASSETS> 5,373,846
<CURRENT-LIABILITIES> 529,745
<BONDS> 1,695,068
6,508
9,223
<COMMON> 189,567
<OTHER-SE> 1,975,723
<TOTAL-LIABILITY-AND-EQUITY> 5,373,846
<SALES> 347,113
<TOTAL-REVENUES> 1,578,719
<CGS> 231,186
<TOTAL-COSTS> 1,226,664
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 66,199
<INCOME-PRETAX> 284,355
<INCOME-TAX> 108,374
<INCOME-CONTINUING> 175,981
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<NET-INCOME> 175,981
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