UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock New York and Pacific
$2.06 No Par Cumulative
Convertible
Preferred Stock New York and Pacific
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. (X)
Aggregate market value of voting stock held by non-affiliates as of
January 31, 1997 - $5,999,200,537
Common shares outstanding, January 31, 1997 - 186,745,542
DOCUMENTS INCORPORATED BY REFERENCE
Document Incorporated Into
Portions of the annual report to stockholders
for the year ended December 31, 1996 Parts I, II and IV
Proxy statement for the 1997 annual meeting
of stockholders Part III
The Exhibit Index is located on pages 22 to 26.
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
THE COMPANY
GENERAL
ALLTEL Corporation ("ALLTEL" or the "Company") is a customer-focused
information technology company that provides wireline and wireless
communications and information services. The Company owns subsidiaries or
investments that provide wireline local and network access service,
wireless communications, wide-area paging and fiber optic-based long-
distance telephone service, and information processing management services
and advanced applications software. Telecommunications products and
electronic and electric wire and cable are warehoused and sold by the
Company's distribution subsidiaries. The Company also publishes telephone
directories for affiliates and other independent telephone companies.
ACQUISITIONS
During 1996, ALLTEL Mobile Communications, Inc. ("ALLTEL Mobile") entered
into a purchase agreement to increase its ownership to 100 percent in two
Alabama Rural Service Areas ("RSAs"), representing approximately 200,000
cellular "pops" or potential customers. This purchase was completed in
February 1997. In addition, ALLTEL Mobile increased its ownership interest
in one North Carolina RSA and purchased an interest in one Florida RSA.
During 1995, ALLTEL Mobile entered into a joint venture with BellSouth
Mobility, Inc. involving cellular properties in five states. As a result
of this joint venture, ALLTEL Mobile owns a 53.5 percent interest in the
Columbia and Florence, South Carolina market, an 11.1 percent interest in
the Greensboro, North Carolina Metropolitan Statistical Area ("MSA"), an
11.1 percent interest in a North Carolina RSA, and no longer owns a
majority interest in the Jackson, Mississippi market. In addition during
1995, ALLTEL Mobile completed an exchange of certain assets in a West
Virginia RSA and an Oklahoma RSA for certain assets in a Georgia RSA and a
North Carolina RSA owned by United States Cellular Corp. ("U.S. Cellular").
The acquired properties are contiguous to ALLTEL Mobile's Albany, Georgia
and Charlotte, North Carolina markets. In January 1995, ALLTEL Mobile
purchased U.S. Cellular's 20 percent interest in the Fort Smith, Arkansas,
MSA, thereby increasing ALLTEL Mobile's ownership interest in the Fort
Smith MSA to 100 percent.
In May 1995, ALLTEL Information Services, Inc. ("ALLTEL Information
Services") acquired Vertex Business Systems, Inc. ("Vertex"), a provider of
international banking software products and services. Vertex,
headquartered in New York, has clients located in Europe, Asia and the
United States.
In November 1994, the Company completed its acquisition of Medical Data
Technology, Inc. ("MDT"). MDT provides information processing services to
14 hospitals in the northeastern United States utilizing comprehensive
application software developed by ALLTEL's healthcare information services
subsidiary. In October 1993, the Company completed its acquisition of TDS
Healthcare Systems Corporation ("TDS"). TDS is a provider of comprehensive
patient care and healthcare enterprise information systems serving more
than 200 hospitals in the United States, Canada and Europe. In 1994, TDS
was merged into ALLTEL's healthcare information services subsidiary. As
further discussed below, the Company sold its healthcare information
services business in January 1997.
1
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
THE COMPANY (continued)
ACQUISITIONS (continued)
Effective November 1, 1993, the Company and GTE Corporation ("GTE")
completed an exchange of telephone service areas in several states. ALLTEL
exchanged approximately 95,000 access lines in Illinois, Indiana and
Michigan and $443 million in cash for substantially all of the assets of
the telephone operations of GTE in the State of Georgia, which served
approximately 320,000 access lines.
In October 1993, ALLTEL Publishing Corporation ("ALLTEL Publishing")
completed its purchase of GTE Directories Service Corporation's ("GTE
Directories") independent publishing business, which included contracts
with more than 125 independent telephone companies across the country.
During 1993, ALLTEL Mobile acquired a 100 percent interest in one Georgia
RSA which had a population of approximately 145,000. In addition, ALLTEL
Mobile acquired interests in two other Georgia RSAs and increased its
ownership in one Texas RSA and one Mississippi RSA.
In January 1993, ALLTEL Mobile acquired an additional 20 percent interest
in the Ft. Smith, Arkansas MSA. This transaction increased ALLTEL Mobile's
interest in the Ft. Smith MSA to 80 percent.
During 1992, ALLTEL Mobile acquired a 60 percent interest and a 90 percent
interest in the Ft. Smith, Arkansas and Fayetteville, Arkansas MSAs,
respectively. In addition, ALLTEL Mobile increased its ownership to 100
percent in the Springfield, Missouri and Charlotte, North Carolina MSAs and
to 64 percent in the Little Rock, Arkansas MSA. Also in 1992, ALLTEL
Mobile purchased an additional 42 percent interest in the Savannah,
Georgia, MSA, increasing its total interest to 80 percent, and acquired
additional interests in three Arkansas and Oklahoma RSAs, one Missouri RSA,
and three Alabama RSAs.
In December 1992, the Company acquired SLT Communications, Inc. ("SLT").
SLT served approximately 49,000 telephone customers primarily in suburban
Houston. It also had approximately 328,000 cellular "pops", including a
2.34 percent ownership in the Houston, Galveston and Beaumont, Texas MSA, a
1 percent interest in the Little Rock, Arkansas MSA, and interests in four
Texas RSA markets. SLT also owned several cable television properties and
a one-third interest in Metropolitan Houston Paging Services, which were
subsequently sold during 1995.
In February 1992, the Company acquired Computer Power, Inc. ("CPI"), the
nation's largest provider of software and processing services to the
mortgage industry. CPI has a comprehensive set of proprietary software
systems which includes the Mortgage Servicing Package, Residential Loan
Inventory Control Package, the Residential Loan Production Control Package,
and a number of related systems as well as consulting, training, portfolio
conversion and other services.
DISPOSITIONS
In January 1997, the Company sold the healthcare portion of its information
services business to Integrated Healthcare Solutions, Inc. for
approximately $154 million consisting of cash and a continuing preferred
stock interest. The preferred stock is convertible into common stock
representing a 15 percent interest in a new privately held company,
Ecilpsys Corporation.
2
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ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
THE COMPANY (continued)
DISPOSITIONS (continued)
In November 1994, the Company signed definitive agreements to sell certain
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 and assumed debt and 3,600 access lines in
Pennsylvania. During 1995, the sale of all properties except for those in
Nevada was completed. The Company completed the sale of the Nevada
properties in March 1996. Upon completion of these property sales, the
Company's wireline subsidiaries now serve approximately 1.7 million access
lines in 14 states.
In 1995, as part of its agreement to sell certain telephone properties, the
Company also completed the sale of certain of its cable television
properties to Citizens. These cable television properties served
approximately 6,800 customers in Arizona, California, New Mexico and Utah.
The Company also completed in 1995 the sale of its cable television
properties in Texas which served approximately 7,200 customers. Upon
completion of these property sales, the Company provides cable television
service to approximately 3,500 customers, primarily to residents of Bolivar
and Stockton, Missouri. These remaining cable television properties are
not significant to the ongoing operations of the Company.
In 1995, ALLTEL Information Services sold all of the assets related to its
check processing operations, including substantially all of the customer
contracts.
In 1992, the Company sold substantially all of the assets of Ocean
Technology, Inc. ("OTI"), which designed, developed, manufactured and
marketed products for use in military command, control and communications
systems. After the sale of OTI, the Company did not have any manufacturing
operations.
MANAGEMENT
The Company's staff at its headquarters and regional offices supervise,
coordinate and assist subsidiaries in management activities, investor
relations, acquisitions, corporate planning, insurance, and technical
research. They also coordinate the financing program for the entire
corporate system.
EMPLOYEES
At January 31, 1997, the Company had 15,436 employees. Some of the
employees of the Company's telephone subsidiaries are part of collective
bargaining units. The Company maintains good relations with all employee
groups.
INDUSTRY SEGMENTS
Financial information about industry segments is included in the Company's
1996 Annual Report to Stockholders, which is incorporated herein by
reference.
3
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ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
WIRELINE (TELEPHONE) OPERATIONS
LOCAL SERVICE
General
The Company's wireline subsidiaries provide local service to over 1,681,000
customer lines through 572 exchanges in 14 states. The wireline
subsidiaries also offer facilities for private line, data transmission and
other communications services.
Regulation
Historically, the Company's wireline subsidiaries have provided local
telephone service under franchises granted by state regulatory commissions
and have been subject to regulation by those regulatory commissions. These
regulatory commissions have had primary jurisdiction over various matters
including local and intrastate toll rates, quality of service, the issuance
of securities, depreciation rates, the disposition of public utility
property, the issuance of debt, and the accounting systems used by those
subsidiaries. The Federal Communications Commission ("FCC") has
historically had primary jurisdiction over the interstate toll and access
rates of these companies and issues related to interstate telephone
service.
The Telecommunications Act of 1996 (the "96 Act"), which became effective
on February 8, 1996, has substantially modified certain aspects of the
states' and the FCC's jurisdictions in the regulation of local exchange
telephone companies. The 96 Act prohibits state legislative or regulatory
restrictions or barriers to entry regarding the provision of local
telephone service. The 96 Act also requires incumbent local exchange
carriers to interconnect with the networks of other telecommunications
carriers, unbundle services into network elements, offer their
telecommunications services at wholesale rates to allow resale of those
services, and allow other telecommunications carriers to locate their
equipment on the premises of the incumbent local exchange carriers. The
96 Act requires all local exchange telephone companies to compensate one
another for the transport and termination of calls on one anothers'
networks.
The Company's wireline subsidiaries are rural telephone companies and are
exempt from certain of the foregoing obligations unless, in response to a
bona fide request, a state regulatory commission removes that exemption.
The 96 Act requires the FCC to develop rules necessary to implement certain
aspects of the 96 Act, and to revise the current Universal Service Fund in
response to the recommendations of a federal-state joint board.
On August 8, 1996, the FCC issued its First and Second Report and Order
promulgating rules to implement certain aspects of the 96 Act. The rules,
among other matters, attempt to impose pricing guidelines that must be used
by state commissions in implementing the 96 Act, defined the network
elements of services that must be unbundled and separately priced,
determined that existing interconnection agreements among incumbent local
exchange carriers must be filed and approved by state commissions, and
required local exchange telephone companies to begin compensating wireless
communications providers for transporting and terminating calls on their
networks. Numerous local exchange telephone companies and state utility
commissions requested that the FCC stay and/or reconsider its order. In
addition, numerous parties filed petitions with various U.S. Courts of
Appeal. These petitions were consolidated in the U.S. Eighth Circuit Court
of Appeals. On September 27, 1996 and on October 15, 1996, the Eighth
Circuit stayed pending a decision on the merits, certain aspects of the
FCC rules, including the pricing guidelines and the rule
4
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
WIRELINE (TELEPHONE) OPERATIONS (continued)
LOCAL SERVICE (continued)
Regulation (continued)
allowing carriers to pick and choose select terms of interconnection that
were agreed to by the incumbent and another telecommunications carrier.
Certain of the Company's wireline subsidiaries have received requests from
wireless communications providers for renegotiation of the existing
transport and termination agreements. The Company's wireline subsidiaries,
as requested, are renegotiating the appropriate terms and conditions in
compliance with the 96 Act. Certain of the Company's wireline subsidiaries
have received requests for transport and termination services from
competing local exchange companies; however, none of these requests have
related to competition with the Company's wireline subsidiaries.
On November 7, 1996, the Federal-State Joint Board adopted a Recommended
Decision regarding universal service, as required by the 96 Act. The Joint
Board did not make recommendations with respect to the existing high cost
funding mechanism provided by current FCC rules. On November 18, 1996, the
FCC released a Public Notice seeking comments on the Joint Board's
Recommended Decision. Comments were sought on issues such as competitive
neutrality, baseline support for low-income consumers, support for schools,
libraries and rural health care providers, as well as, the administrative
requirements to achieve these goals. The FCC is required to issue a
universal service order by May 8, 1997. It is likely that the FCC will
revise the high cost funding mechanism provided by current rules. The
Company's wireline subsidiaries received approximately $47 million from the
current federal universal service fund in 1996.
On December 24, 1996, the FCC issued its order implementing the accounting
safeguards requirements of the 96 Act. These safeguards are designed to
ensure that subscribers of regulated non-competitive telecommunications
services do not subsidize incumbent local exchange carriers' provision of
competitive services. As part of this order, the FCC adopted certain
modifications to its affiliated transactions rules to provide greater
protection against such subsidization. The order is effective beginning in
1997. The Company is currently in the process of determining what
implications, if any, the order may have on its wireline operations.
There were no local rate increases requested by any of the Company's
wireline subsidiaries in 1996, nor are there any rate requests currently
pending before regulatory commissions. During 1996, wireline operations
were affected by certain regulatory commission orders designed to reduce
earnings levels. These orders did not materially affect the results of
operations of the Company's wireline subsidiaries.
Certain states in which the Company's wireline subsidiaries operate have
adopted alternatives to rate-of-return regulation, either through
legislative or regulatory commission actions. On February 4, 1997,
Arkansas enacted the Telecommunications Regulatory Reform Act of 1997,
that, among other matters, authorizes telecommunications carriers in
Arkansas to elect to be regulated under forms of regulation that
substantially reduce regulatory oversight, establishes a universal service
fund to compensate incumbent local exchange carriers for, among other
matters, reductions in federal universal service support funds, and allows
the local exchange company pricing flexibility. The Company has elected to
be regulated under alternative regulation in Arkansas for its subsidiary,
ALLTEL Arkansas, Inc. The Company has also elected alternative regulation
for its Georgia subsidiaries, Sugar Land Telephone Company in Texas,
5
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
WIRELINE (TELEPHONE OPERATIONS (continued)
LOCAL SERVICE (continued)
ALLTEL Alabama, Inc., and The Western Reserve Telephone Company in Ohio.
The Company continues to evaluate alternative regulation for its other
wireline subsidiaries.
The Company's competitive local exchange subsidiary, ALLTEL Communications,
Inc., ("ALLTEL Communications") has filed for approval to provide local
exchange service in the states of Arkansas and North Carolina and
anticipates applications in other states in the near future. ALLTEL
Communications is negotiating interconnection agreements with the
appropriate incumbent local exchange carriers and is installing state-of-
the-art networks that will enable it to provide services on both a
facilities and resale basis. ALLTEL Communications will provide local
services in combination with other services provided by subsidiaries of the
Company, including long-distance, wireless and internet services.
Competition
Historically, the Company's wireline subsidiaries have not experienced
significant competition in the service areas allocated to them by the state
regulatory commissions. As a result of the passage of the 96 Act, the
Company's local wireline subsidiaries may experience increased competition
from various sources, including, but not limited to, resellers of their
local exchange services, large end users installing their own networks,
interexchange carriers, satellite transmission services, cellular
communications providers, cable television companies, radio-based personal
communications companies, competitive access providers and other systems
capable of completely or partially bypassing the local telephone
facilities. The Company cannot predict the specific effects of competition
on its local telephone business, but is intent on taking advantage of the
various opportunities that competition should provide. The Company is
currently addressing potential competition by focusing on improved customer
satisfaction, reducing its costs, increasing efficiency, restructuring
rates and examining new product offerings and new markets for entry.
LONG-DISTANCE SERVICES
General
The Company began offering long-distance telecommunications services during
1996. Long-distance service is being provided on a resale basis by the
Company's subsidiary, ALLTEL Communications. ALLTEL Communications is
currently providing long-distance service in all of the states where the
Company provides local exchange service. In addition, ALLTEL
Communications has begun to offer its services outside of the Company's
local exchange service areas. As of December 31, 1996, ALLTEL
Communications had more than 134,000 customers.
Regulation
As a long-distance reseller, ALLTEL Communications' intrastate business is
subject to limited regulation by state regulatory commissions and its
interstate business is subject to regulation by the FCC. State regulatory
commissions currently require long-distance resellers to obtain a
certificate of operating authority and the majority also require long-
distance resellers to file tariffs. The FCC issued an order which
eliminated tariffing requirements. The FCC and most state regulatory
commissions also require such companies to meet certain minimum service
standards.
6
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
WIRELINE (TELEPHONE) OPERATIONS (continued)
LONG-DISTANCE SERVICES (continued)
Competition
The long-distance marketplace is extremely competitive and continues to
receive relaxed regulation from both the FCC and state regulatory
commissions. In an effort to meet the competitive demands of the long-
distance industry, ALLTEL Communications has created several business and
residential service offerings necessary to attract potential customers,
such as volume price discounts, calling cards and simplified one rate
plans, to set itself apart from other competitors within the long-distance
marketplace.
ACCESS SERVICES
Long-distance companies pay access charges to the Company's wireline
subsidiaries for the use of their local networks to originate and terminate
their customers' long-distance calls.
Regulation
Access charges concerning interstate services are regulated by the FCC. On
December 24, 1996, the FCC released a Notice of Proposed Rulemaking
regarding access charge reform. The proposed rules, in most significant
aspects, are not applicable to the Company's wireline subsidiaries. The
FCC has indicated it will issue another proposed rulemaking with respect to
rate-of-return companies, such as the Company's wireline subsidiaries.
The Company's wireline subsidiaries have elected to remain under rate base
rate-of-return regulation ("ROR") with respect to interstate services. For
telephone companies remaining under ROR regulation, the FCC authorizes a
rate-of-return that telephone companies may earn on interstate services
they provide. During 1996, the FCC did not represcribe the rate-of-return,
which is currently 11.25 percent.
The Company's wireline subsidiaries currently receive compensation from
long-distance companies for intrastate, intraLATA services through access
charges or toll settlements that are subject to state regulatory commission
approval.
Billing and collection
Interstate billing and collection services were previously detariffed as
ordered by the FCC. The Company's wireline subsidiaries continue to
provide interstate billing and collection services for interexchange
carriers through various agreements and also provide intrastate billing and
collection services under state tariff arrangements or under contract where
these services are detariffed. The demand for these services may increase
as a result of the entrance of other carriers into the local and
long-distance markets.
Competition
One consequence of competition is the bypass of the Company's wireline
subsidiaries' facilities by local networks constructed by new providers of
local exchange telephone services. While currently there has been no
significant measurable effect on the Company's wireline subsidiaries due to
competition, the 96 Act may facilitate various forms of bypass of the
Company's wireline subsidiaries' networks.
7
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
WIRELESS (CELLULAR) OPERATIONS
GENERAL
ALLTEL Mobile provides wireless telephone service to a wide array of
customers in various markets throughout the United States, primarily
located in the Sun Belt. As wireless telephones have become increasingly
popular across broader segments of the population, ALLTEL Mobile has, in
addition to its traditional sales offices, opened retail outlets and
located retail centers in high traffic department stores, where customers
can purchase equipment and subscribe to ALLTEL Mobile services.
BUSINESS
One measure of a wireless telephone market's potential is the market's
population times the percent of a company's ownership interest of the
cellular operation in that market ("pops"). ALLTEL Mobile owns a majority
interest in wireless operations in 13 MSAs and a minority interest in 14
other MSAs, which total 5.1 million MSA cellular pops. ALLTEL Mobile also
owns a majority interest in wireless operations in 41 RSAs and a minority
interest in 35 other RSAs, which total 3.4 million wireless pops. ALLTEL
Mobile operates systems in Montgomery, Alabama; Ft. Smith, Arkansas;
Fayetteville, Arkansas; Little Rock, Arkansas; Ocala/Gainesville, Florida;
Albany, Georgia; Aiken, South Carolina/Augusta, Georgia; Savannah, Georgia;
Springfield, Missouri; Charlotte, North Carolina; Columbia, South Carolina
and Florence, South Carolina.
ALLTEL Mobile's subscriber fees are based upon the prevailing market and
competitive conditions which exist in each service area operated. At
December 31, 1996, ALLTEL Mobile provided service to more than 795,000
customers, which, based on its 8.5 million total pops, represented a market
penetration rate of 9.4 percent. For the year ended December 31, 1996,
ALLTEL Mobile's churn rate averaged 2.2 percent in its wireless service
areas, which is comparable to the industry average.
COMPETITION
Wireless carriers today face competition from a second carrier licensed to
provide wireless telephone services in the same geographic area, as well as
from wireless resellers who buy bulk wireless services from one of the two
licensees and resell it to their customers. ALLTEL Mobile will face new
competitors in its markets as a result of the licensing of new wireless
service providers including providers of personal communication services
("PCS") and enhanced mobile services. Several PCS providers began
operations in ALLTEL Mobile's markets during 1996; however, competition
from these PCS providers has not had a significant adverse effect on ALLTEL
Mobile's operations. The Company expects more PCS providers to begin
operations in its markets during 1997.
The 96 Act provides cellular carriers numerous opportunities to emerge as
full competitors to traditional telephone companies, including the
opportunity to resell local telephone services and to be compensated by
other telecommunications carriers for calls terminated on the cellular
carriers' networks. Wireless carriers are not subject to the enhanced
interconnection, resale, unbundling and other obligations that the 96 Act
imposed on the local exchange companies unless the FCC determines wireless
carriers should be considered local exchange carriers under the 96 Act.
The 96 Act limits the imposition on wireless carriers of equal access
requirements without a detailed FCC rulemaking. The 1993 Omnibus Budget
Reconciliation Act preempted most state regulation of wireless carriers,
therefore, wireless carriers' services are likely to continue to be
minimally regulated for the foreseeable future.
8
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ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
WIRELESS (CELLULAR) OPERATIONS (continued)
OTHER
The Company participated in the FCC's "D" and "E" band PCS auctions, and on
January 14, 1997, the Company was awarded the PCS licensing rights for 73
markets in 12 states. When issued by the FCC, the PCS licenses will enable
the Company to increase the size of its potential wireless customer base to
34 million. In addition, the PCS licenses will increase the overlap of the
Company's system-wide wireline and wireless service areas within its Sun
Belt markets to 97 percent.
PAGING
ALLTEL Mobile also operates wide-area computer-driven paging networks as a
complementary service to cellular telephones in Arkansas and Florida. At
December 31, 1996, ALLTEL Mobile provided paging service to more than
37,000 customers, which, based on the total pops in its service areas of
2.0 million, represented a market penetration rate of 1.9 percent. For the
year ended December 31, 1996, revenues per subscriber averaged $12 per
month, and ALLTEL Mobile's churn rate averaged 3.1 percent in its paging
service areas. The Company also resells paging services in other ALLTEL
Mobile cellular service areas.
INFORMATION SERVICES
GENERAL
ALLTEL Information Services provides a wide range of information processing
services primarily to the financial services and telecommunications
industries through information processing centers that it staffs, equips
and operates. Information processing contracts are generally for a
multi-year period. ALLTEL Information Services also develops and markets
software worldwide to financial services and telecommunications companies
operating their own information processing departments. The principal
operating units of the Company's information services business consist of
the Financial Services Division, the Telecommunications Division and the
Enterprise Network Services Division.
The Financial Services Division markets software and services that have
been developed and improved continuously over the last 28 years and are
designed to fulfill substantially all of the retail and wholesale
information processing and management information requirements of financial
institutions. In addition, the Financial Services Division also provides
data processing and related computer software and systems to financial
institutions originating and/or servicing single family mortgage loans.
This division's software products and processing services, combined with
its team of consultants, are intended to offer a cost-effective alternative
to the extensive technical support staff and the enlarged group of mortgage
bankers which would otherwise have to be assembled in-house by each
customer. The Financial Services Division's on-line systems automate
processing functions required in the origination of mortgage loans, the
management of such loans while in inventory before they are sold in the
secondary market, and their subsequent servicing.
The Telecommunications Division is primarily engaged in the development and
marketing of billing services and customer care software to local
telephone, wireless and PCS companies. In addition, the Telecommunications
Division provides data processing and outsourcing services to both wireline
and wireless telecommunications service providers.
9
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ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
INFORMATION SERVICES (continued)
GENERAL (continued)
The Enterprise Network Services Division was formed in 1996 to capitalize
on the increasing market demand for network services resulting from the
convergence of voice, data, video, and imaging technologies. The
Enterprise Network Services Division offers a comprehensive package of
network services to a variety of industries including financial, healthcare
and telecommunications. The services provided by this division include
network consulting, integration and operations services for a customer's
network environment, ranging from the wide-area network (WAN) to the
desktop. These value-added services are targeted at helping customers
improve employee and business productivity, create more effective customer
relationships and successfully enter new markets using the network as an
alternative distribution channel. The Enterprise Network Services Division
delivers its services through insourcing, cosourcing and outsourcing
arrangements as driven by the customer's requirements.
CUSTOMERS
The Financial Services Division's primary markets for its financial
products and services are the nation's commercial banks and savings
institutions and financial institutions throughout the world. Financial
software and services are also marketed to credit unions and to financial
institutions originating or servicing single family mortgage loans that
have sold the loans in the secondary market. These financial institutions,
which include many of the largest servicers of residential mortgages, are
located throughout the United States. In total, nearly 18 million mortgage
loans representing over $1.5 trillion are processed using the Financial
Services Division's software. The Telecommunications Division's primary
markets for its telecommunications products and services consist of the top
40 telephone companies and the top 50 cellular companies in the United
States, and certain PCS companies in the United States, and approximately
100 international telecommunications companies. The roll out of the
wireless companies that will operate within the PCS spectrum bandwidths in
the United States has significantly increased the potential customer base
of the Telecommunications Division. The Enterprise Network Services
Division markets its services to Fortune 1000 companies.
COMPETITION
The Financial Services Division's competition primarily comes from
"in-house" bank information processing departments and other companies
engaged in active competition for financial institution outsourcing
contracts. Numerous large financial institutions provide information
processing for smaller institutions in their respective geographic areas,
along with other companies that perform such services for small
institutions. The Telecommunications Division also faces strong
competition from internal information technology departments. In addition,
there are also other information services' companies that provide
information processing and management services to the telecommunications
industry. The Enterprise Network Services Division faces competition from
three primary sources including "in-house" network organizations, large
information technology outsourcing providers focused on leveraging their
existing products and network infrastructures, and smaller, niche-players
seeking to expand their scope of internetworking offerings. ALLTEL
Information Services competes in each of its markets by providing a high
level of service and support. ALLTEL Information Services substantially
relies upon and vigorously enforces contract and trade secret laws and
internal non-disclosure safeguards to protect the proprietary nature of its
computer software and service methodologies.
10
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ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
INFORMATION SERVICES (continued)
REGULATION AND EXAMINATION
The Financial Services Division is regulated by the federal agencies that
have supervisory authority over banking, thrift, and credit union
operations. The Financial Services Division is also classified as one of
twelve national vendors that, as a result of their market share, process a
significant portion of the financial industry's assets. These industry
leaders are also examined by the federal Financial Institutions Examination
Council on an ongoing basis. ALLTEL Information Services' management
practices, policies, procedures, standards, and overall financial condition
are components of these reviews.
In addition to these corporate examinations, individual processing sites
are subject to examination, as if they were departments of their respective
clients, by federal and state regulators, as well as the clients' internal
audit departments and their independent auditing firms. The same standards
of performance are applied to those information processing centers as are
applied to the client financial institutions. Reports of the individual
data center performance are furnished to the Board of Directors of ALLTEL
Information Services and to the Board of Directors of the examined client.
The supervisory agencies include applicable state banking departments, the
Federal Deposit Insurance Corporation, the Office of Thrift Supervision,
the Office of the Comptroller of the Currency, the Board of Governors of
the Federal Reserve System, and the National Credit Union Administration.
ALLTEL Information Services' processing contracts include a commitment to
install all necessary changes in its computer software that are required by
changes in regulations.
The Enterprise Network Services Division operates transmitters at the
network's information processing facility hub and operates very small
aperture technology ("VSAT") earth stations at numerous customer locations.
Prior to initiation, construction or operation of the transmitters used in
a VSAT satellite network, operators of these transmitters are required by
the Communications Act of 1934 to be authorized by the FCC. The FCC grants
licenses to VSAT operators for a predetermined number of earth stations
that may be placed at unspecified locations in the United States. The
Enterprise Network Services Division holds five VSAT licenses issued by the
FCC to operate its domestic earth station satellite network, consisting of
one 8.1m license for its VSAT hub located in Jacksonville, Florida and four
other VSAT licenses ranging from 1.0m to 2.4m. Three of the VSAT licenses,
including the 8.1m license, will expire in 1997, and the remaining two
licenses will expire in 2003. The Company intends to renew the VSAT
licenses that will expire in 1997.
PRODUCT DEVELOPMENT AND SUPPORT
In the past five years, ALLTEL Information Services has spent approximately
$334.9 million ($111.8 million in 1996) on mainframe and client/server
software design and development. ALLTEL Information Services is also
developing products that are utilized in a UNIX based environment,
including the Telecommunications Division's state-of-the-art Virtuoso II
billing and customer care product, which became operational in 1996.
Changes in regulatory requirements of both state and federal authorities,
increasing competition, and the development of new products and markets
create the need to continually update or modify existing software and
systems offered to customers. ALLTEL Information Services intends to
continue to maintain, improve, and expand the functions and capabilities of
its software products over the next several years.
11
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ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
PRODUCT DISTRIBUTION OPERATIONS
GENERAL
ALLTEL Supply, Inc. ("ALLTEL Supply"), with eight warehouses and seventeen
counter-sales showrooms across the United States, is a major distributor of
telecommunications equipment and materials. It supplies equipment to
affiliated and non-affiliated telephone companies, business systems
suppliers, railroads, governments, and retail and industrial companies.
HWC Distribution Corp. ("HWC"), with nine warehouses throughout the United
States, is a major supplier of specialty wire and cable products.
COMPETITION
ALLTEL Supply and HWC (the "Distribution companies") experience substantial
competition throughout their sales territories from other distribution
companies and direct sales by manufacturers. Competition is based
primarily on quality, product availability, service, price, and technical
assistance. Since the products distributed by the Distribution companies
are also offered by other competitors, the Distribution companies
differentiate themselves from competitors by providing value-added services
such as offering expert technical assistance, maintaining extensive
inventories in strategically located warehouses and counter-sales showrooms
to facilitate single supplier sourcing and "just-in-time" delivery,
maintaining a full range of alternative product lines, and by providing
staging, assembly and other services. The Company is continually
evaluating and implementing policies and strategies which will meet
customer expectations and position the Distribution companies in the market
as a quality customer-focused distributor. Examples of these policies and
strategies include the customer cable management program offered by HWC
and the "just-in-time" inventory program by ALLTEL Supply.
PRODUCTS
ALLTEL Supply offers more than 54,000 products for sale. In addition,
ALLTEL Supply inventories single and multi-line telephone sets, local area
networks ("LANs"), switching equipment modules, interior cable, pole line
hardware, and various other telecommunications supply items. HWC
inventories approximately 43,000 reels of specialty wire and cable. These
include shielded and unshielded power cables, flame resistant cables, and
high temperature precision engineered cables. The Distribution companies
have not encountered any material shortages or delays in delivery of
products from their suppliers.
OTHER
In October 1996, the Company announced its plan to dispose of HWC. The
Company plans to complete the sale of HWC in 1997.
DIRECTORY PUBLISHING
ALLTEL Publishing coordinates advertising, sales, printing, and
distribution for 360 telephone directories in 36 states. In October 1993,
ALLTEL Publishing completed its purchase of GTE Directories independent
publishing business, which included contracts with more than 125
independent telephone companies across the country. Under terms of the
agreement, ALLTEL Publishing provides all directory publishing services
including contract management, production and marketing. As subcontractor,
GTE Directories provides directory sales and printing services through a
separate contract with ALLTEL Publishing.
12
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ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 1. Business
CABLE TELEVISION SERVICE
The Company's cable television operations are limited to only providing
service to approximately 3,500 customers located in the cities of Bolivar
and Stockton, Missouri. The Company does not hold any spectrum or other
licenses issued by the FCC related to its cable television operations. The
Company's cable system receives signals by means of special antennae,
microwave relay systems and earth stations. The system amplifies such
signals and distributes programs to subscribers through a coaxial cable
system. The number of broadcast channels provided by the Company in each
of its two service areas are 28 channels. The sources of the Company's
cable television programming consist of the signals received from national
television networks, local and other independent television stations that
operate in or near to the Company's service areas, satellite-delivered
non-broadcast channels, and public service announcements. Through
contractual arrangements, the Company has obtained the authority to
re-transmit the program offerings supplied by these providers.
INVESTMENTS
WORLDCOM, INC.
The Company owns approximately a 3 percent interest in WorldCom, Inc., a
publicly-held company. WorldCom, Inc. is a large long-distance company in
the United States and is a full service provider of international
telecommunications and specialized broadcasting services.
APEX GLOBAL INFORMATION SERVICES, INC.
During 1996, the Company made an approximate $5 million investment in Apex
Global Information Services, Inc. ("AGIS"), one of only six global
providers of Internet access services. As a result, the Company owns a 5
percent interest in AGIS. The Company also has an option to buy an
additional 5 percent of AGIS' stock at a later date.
HORIZON TELECOM, INC.
The Company owns a 19.8 percent interest in Horizon Telecom, Inc., which
serves approximately 27,000 telephone lines in Ohio. Frederick G. Griech,
President of ALLTEL Telephone Services Corporation's Northeast Region, and
Dennis Mervis, President of ALLTEL Ohio, Inc. and The Western Reserve
Telephone Company, are members of Horizon Telecom, Inc.'s Board of
Directors.
COMDIAL CORPORATION
During 1996, the Company sold all of its remaining shares of stock in
Comdial Corporation, a producer of telephone sets and key systems.
GO COMMUNICATIONS CORPORATION
During 1995, the Company made an approximate $32 million investment in GO
Communications Corporation ("GOCC"). The Company's investment in GOCC was
subject to a number of conditions, including GOCC's ability to secure "C"
band licenses in the PCS auctions conducted by the FCC. Following GOCC's
decision to exit the PCS auctions, the Company elected to withdraw its
investment.
13
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part I
Item 2. Properties
TELEPHONE PROPERTY
The Company's wireline subsidiaries own telephone property in their
respective operating territories which consists primarily of land and
buildings, central office equipment, telephone lines, and related
equipment. The telephone ines include aerial and underground cable,
conduit, poles and wires. Central office equipment includes digital
switches and peripheral equipment. The gross investment by category in
telephone property as of December 31, 1996, was as follows:
(Thousands)
Telephone-
Land, buildings and leasehold improvements $ 279,439
Central office equipment 1,255,363
Outside plant 1,992,325
Furniture, fixtures, vehicles and other 300,532
Total $3,827,659
Certain properties of the Company and its wireline subsidiaries are pledged
as collateral for long-term debt.
OTHER PROPERTY
Other properties of the Company in service consist primarily of property,
plant and equipment used in providing wireless communications services,
information services and product distribution operations. The total
investment by category for the non-telephone operations of the Company as
of December 31, 1996, was as follows:
(Thousands)
Land, buildings and leasehold improvements $ 230,356
Data processing equipment 378,796
Cellular telephone plant and equipment 416,964
Furniture, fixtures and miscellaneous 91,114
Total $1,117,230
All of the Company's property is considered to be in reasonably sound
operating condition.
14
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part II
Item 3. Legal Proceedings
The Company is not currently involved in any material pending
legal proceedings, other than routine litigation incidental to its
business, and, to the knowledge of the Company's management, no
material legal proceedings, either private or governmental, are
contemplated or threatened.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to the security holders for a vote
during the fourth quarter of the fiscal year.
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
As of January 31, 1997, the approximate number of stockholders of
common stock including an estimate for those holding shares in
brokers' accounts was 92,000. For additional information
pertaining to Markets for ALLTEL Corporation's Common Stock and
Related Stockholder Matters, refer to pages 37, 39, 43 and the
inside back cover of ALLTEL's 1996 Annual Report to Stockholders,
which is incorporated herein by reference.
Item 6. Selected Financial Data
For information pertaining to Selected Financial Data of ALLTEL
Corporation, refer to page 34 of ALLTEL's 1996 Annual Report to
Stockholders, which is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
For information pertaining to Management's Discussion and Analysis
of Financial Condition and Results of Operations of ALLTEL
Corporation, refer to pages 27-32 of ALLTEL's 1996 Annual Report
to Stockholders, which is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
For information pertaining to Financial Statements and
Supplementary Data of ALLTEL Corporation, refer to pages 33 and
35-47 of ALLTEL's 1996 Annual Report to Stockholders, which is
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
During the two most recent fiscal years or the subsequent interim
period up to the date of this Form 10-K, there were no
disagreements with the Company's independent certified public
accountants on any matter of accounting principles or practices,
financial statement disclosures or auditing scope or procedures.
In addition, none of the "kinds of events" described in item
304(a)(1)(v)(A), (B), (C) and (D) of Regulation S-K have occurred.
15
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part III
Item 10(a). Directors of the Registrant
For information pertaining to Directors of ALLTEL Corporation
refer to "Election of Directors" in ALLTEL's Proxy Statement for
its 1997 Annual Meeting of Stockholders, which is incorporated
herein by reference.
Item 10(b). Executive Officers of the Registrant
Name Age Position
Joe T. Ford 59 Chairman, President and
Chief Executive Officer
Scott T. Ford 34 Executive Vice President
Tom T. Orsini 46 Executive Vice President
Dennis J. Ferra 43 Senior Vice President and
Chief Financial Officer
Francis X. Frantz 43 Senior Vice President -
External Affairs,
General Counsel and Secretary
John L. Comparin 44 Vice President - Human Resources
and Administration
Ronald D. Payne 50 Vice President -
Business Development
Jerry M. Green 49 Treasurer
John M. Mueller 46 Controller
Deborah J. Akins 41 Assistant Treasurer
There are no arrangements between any officer and any other person
pursuant to which he/she was selected as an officer. Except for
Scott T. Ford, each of the officers named above has been employed
by ALLTEL or a subsidiary for the last five years. Prior to
joining ALLTEL, Scott T. Ford served as Assistant to the Chairman
of Stephens Group, Inc. of Little Rock, Arkansas.
Scott T. Ford is the son of Joe T. Ford.
Item 11. Executive Compensation
For information pertaining to Executive Compensation, refer to
"Management Compensation" in ALLTEL's Proxy Statement for its 1997
Annual Meeting of Stockholders, which is incorporated herein by
reference.
16
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part III
Item 12. Security Ownership of Certain Beneficial Owners and Management
For information pertaining to beneficial ownership of ALLTEL
securities, refer to "Security Ownership of Certain Beneficial
Owners and Management" in ALLTEL's Proxy Statement for its 1997
Annual Meeting of Stockholders, which is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions
For information pertaining to Certain Relationships and Related
Transactions, refer to "Certain Transactions" in ALLTEL's Proxy
Statement for its 1997 Annual Meeting of Stockholders, which is
incorporated herein by reference.
Form 10-K, Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as a part of this report
1. Financial Statements:
The following Consolidated Financial Statements of ALLTEL
Corporation and subsidiaries, included in the annual
report of ALLTEL Corporation to its stockholders for the
year ended December 31, 1996, are incorporated herein by
reference:
Annual Report
Page Number
Report of Independent Public Accountants 33
Consolidated Statements of Income -
for the years ended
December 31, 1996, 1995 and 1994 35
Consolidated Balance Sheets -
December 31, 1996 and 1995 36-37
Consolidated Statements of Cash Flows -
for the years ended
December 31, 1996, 1995 and 1994 38
Consolidated Statements of
Shareholders' Equity -
for the years ended
December 31, 1996, 1995 and 1994 39
Notes to Consolidated Financial Statements 41-47
Supplementary Information-
Business Segment Information 40 and 47
The Consolidated Financial Statements and Supplementary
Financial Information listed in the above index which are
included in the 1996 Annual Report to Stockholders of ALLTEL
Corporation are hereby incorporated by reference.
17
<PAGE>
ALLTEL Corporation
Securities and Exchange Commission
Form 10-K, Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued):
2. Financial Statement Schedules:
Form 10-K
Page Number
Report of Independent Public Accountants 20
Schedule II. Valuation and Qualifying Accounts 21
3. Exhibits:
See "Exhibit Index" located on page 22-26 of this
document.
(b) No reports on Form 8-K were filed during the last quarter of
1996.
The Company filed a Current Report on Form 8-K dated
February 3, 1997, which was filed in connection with a
declaration by the Company's Board of Directors on
January 30, 1997, to grant a dividend of one preferred share
purchase right for each share of common stock of the Company.
Separate condensed financial statements of ALLTEL Corporation
have been omitted since the Company meets the tests set forth in
Regulation S-X Rule 4-08(e)(3). All other schedules are omitted
since the required information is not present or is not present in
amounts sufficient to require submission of the schedule, or
because the information required is included in the consolidated
financial statements and notes thereto.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ALLTEL Corporation
Registrant
By /s/ Joe T. Ford
Joe T. Ford, Chairman, President and Date: February 26, 1997
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By /s/ Dennis J. Ferra Date: February 26, 1997
Dennis J. Ferra, Senior Vice President and
Chief Financial Officer
* Joe T. Ford, Chairman, President,
Chief Executive Officer, and Director
* Scott T. Ford, Executive Vice President and Director
* Dennis J. Ferra, Senior Vice President and
Chief Financial Officer
* John M. Mueller, Controller
By /s/ Dennis J. Ferra
* Ben W. Agee, Director * (Dennis J. Ferra,
Attorney-in-fact)
* Michael D. Andreas, Director
Date: February 26, 1997
* John R. Belk, Director
* Lawrence L. Gellerstedt III, Director
* W. W. Johnson, Director
* Emon A. Mahony, Jr., Director
* John P. McConnell, Director
* Josie C. Natori, Director
* Ronald Townsend, Director
* William H. Zimmer, Jr., Director
19
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
ALLTEL Corporation:
We have audited in accordance with generally accepted auditing standards,
the financial statements included in ALLTEL Corporation's Annual Report to
stockholders incorporated by reference in this Form 10-K, and have issued
our report thereon dated January 31, 1997. Our audit was made for the
purpose of forming an opinion on those statements taken as a whole. The
schedule on page 21 is the responsibility of the company's management and
is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ARTHUR ANDERSEN LLP
Little Rock, Arkansas,
January 31, 1997.
20
<PAGE>
<TABLE>
<CAPTION>
ALLTEL CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Dollars in Thousands)
Column A Column B Column C Column D Column E
<S> <C> <C> <C> <C> <C> <C> <C>
Additions
Per Adjusted Charged to Charged Balance at
Previous Adjustments Beginning Cost and to Other Deduction End of
Description Report (B) Balance Expenses Accounts Describe Period
Allowance for doubtful accounts,
subscribers and others:
For the years ended
December 31, 1996 $18,439 $ - $18,439 $38,771 $ - $35,939 (A) $21,271
December 31, 1995 $21,510 $ - $21,510 $35,860 $ - $38,931 (A) $18,439
December 31, 1994 $10,766 $ 39 $10,805 $33,504 $ - $22,799 (A) $21,510
Notes:
(A) Accounts charged off less recoveries of amounts previously charged off.
(B) Reclassification of amount for companies purchased in 1994.
</TABLE>
21
<PAGE>
EXHIBIT INDEX
Number and Name Page
(3)(a) Amended and Restated Certificate of Incorporation of *
ALLTEL Corporation (incorporated herein by reference
to Exhibit B to Proxy Statement, dated March 9, l990).
(b) By-Laws of ALLTEL Corporation (Exhibit 3(b) to Form SE *
dated February 17, 1993).
(4)(a) Rights Agreement dated as of January 30, l997, between *
ALLTEL Corporation and First Union National Bank of
North Carolina (incorporated herein by reference to
Form 8-K dated February 3, l997, filed with the Commission
on February 4, l997).
(b) The Company agrees to provide to the Commission, upon --
request, copies of any agreement defining rights of
long-term debt holders.
(10)(a)(1) Executive Compensation Agreement and amendments thereto *
by and between the Corporation and Joe T. Ford
(incorporated herein by reference to Exhibit 10(b)
to Form 10-K for the fiscal year ended December 31, 1983).
(a)(2) Modification to Executive Compensation Agreement by and *
between the Corporation and Joe T. Ford effective as of
January 1, 1987 (incorporated herein by reference to
Exhibit 10(b)(2) to Form 10-K for the fiscal year ended
December 31, 1986).
(a)(3) Modification to Executive Compensation Agreement by and *
between ALLTEL Corporation and Joe T. Ford, effective as
of January 1, 1991 (incorporated herein by reference to
Exhibit 10 of ALLTEL Corporation Registration Statement
(No. 33-44736) on Form S-4 dated December 23, 1991).
(a)(4) Split-dollar Life Insurance Agreement by and between the *
Corporation and Joe T. Ford effective as of March 1, 1994
(incorporated herein by reference to Exhibit 10(a)(4)
to Form 10-K for the fiscal year ended December 31, 1994).
(b) Change in Control Agreement by and between the Company *
and Scott T. Ford effective as of April 25, 1996
(incorporated herein by reference to Exhibit 10(c)(6)
to Form 10-Q for the period ended June 30, 1996).
(c)(1) Change in Control Agreement by and between the Company *
and John L. Comparin effective as of October 24, 1994
(incorporated herein by reference to Exhibit 10(c)(2)
to Form 10-K for the fiscal year ended December 31, 1994).
(c)(2) Change in Control Agreement by and between the Company *
and Dennis J. Ferra effective as of October 24, 1994
(incorporated herein by reference to Exhibit 10(c)(3)
to Form 10-K for the fiscal year ended December 31, 1994).
* Incorporated herein by reference as indicated.
22
<PAGE>
EXHIBIT INDEX, Continued
Number and Name Page
(10)(c)(3) Change in Control Agreement by and between the Company and *
Francis X. Frantz effective as of October 24, 1994
(incorporated herein by reference to Exhibit 10(c)(4)
to Form 10-K for the fiscal year ended December 31, 1994).
(c)(4) Change in Control Agreement by and between the Company and *
Tom T. Orsini effective as of October 24, 1994 (incorporated
herein by reference to Exhibit 10(c)(5) to Form 10-K for the
fiscal year ended December 31, 1994).
(c)(5) Change in Control Agreement by and between the Company and *
Ronald D. Payne effective as of October 24, 1994
(incorporated herein by reference to Exhibit 10(c)(6)
to Form 10-K for the fiscal year ended December 31, 1994).
(d)(1) Split-dollar Life Insurance Agreement by and between the *
Corporation and Dennis J. Ferra effective as of March 1, 1994
(incorporated herein by reference to Exhibit 10(d)(1) to
Form 10-K for the fiscal year ended December 31, 1994).
(d)(2) Split-dollar Life Insurance Agreement by and between the *
Corporation and Francis X. Frantz effective as of March 1, 1994
(incorporated herein by reference to Exhibit 10(d)(2) to
Form 10-K for the fiscal year ended December 31, 1994).
(d)(3) Split-dollar Life Insurance Agreement by and between the *
Corporation and Tom T. Orsini effective as of March 1, 1994
(incorporated herein by reference to Exhibit 10(d)(3) to
Form 10-K for the fiscal year ended December 31, 1994).
(e)(1) ALLTEL Corporation Supplemental Executive Retirement *
Plan, effective October 24, 1994 (incorporated herein by
reference to Exhibit 10(e)(1) to Form 10-K for the
fiscal year ended December 31, 1994).
(e)(2) Directors' Retirement Plan of ALLTEL Corporation, as *
amended and restated effective January 1, 1994
(incorporated herein by reference to Exhibit 10(d) to
Form 10-K for the fiscal year ended December 31, 1993).
(e)(3) Amendment to the Directors' Retirement Plan of 67
ALLTEL Corporation(January 1, 1994 Restatement) to
terminate the Plan effective January 30, 1997.
(f)(1) Executive Deferred Compensation Plan of ALLTEL *
Corporation, as amended and restated effective
October 1, 1993 (incorporated herein by reference
to Exhibit 10(e) to Form 10-K for the fiscal
year ended December 31, 1993).
(f)(2) Deferred Compensation Plan for Directors of ALLTEL *
Corporation, as amended and restated effective
October 1, 1993 (incorporated herein by reference
to Exhibit 10(f) to Form 10-K for the fiscal
year ended December 31, 1993).
(f)(3) Amendment to Deferred Compensation Plan for Directors 73
of ALLTEL Corporation (October 1, 1993 Restatement).
* Incorporated herein by reference as indicated.
23
<PAGE>
EXHIBIT INDEX, Continued
Number and Name Page
(10)(g)(l) ALLTEL Corporation 1975 Incentive Stock Option Plan *
(as amended and restate effective July 26, 1988)
(incorporated herein by reference to Exhibit 10(i)
to Form 10-K for the fiscal year ended December 31, 1988).
(g)(2) ALLTEL Corporation 1991 Stock Option Plan *
(incorporated herein by reference to Exhibit A to
Proxy Statement, dated March 8, 1991).
(g)(3) ALLTEL Corporation l994 Stock Option Plan for Employees *
(incorporated herein by reference to Exhibit A to Proxy
Statement dated March 4, l994).
(g)(4) ALLTEL Corporation l994 Stock Option Plan for *
Nonemployee Directors(incorporated herein by reference
to Exhibit B to Proxy Statement dated March 4, l994).
(g)(5) First Amendment to ALLTEL Corporation l994 78
Stock Option Plan for Nonemployee Directors.
(h) Systematics, Inc. 1981 Incentive Stock Option Plan *
and Amendment No. 1 thereto (incorporated herein by
reference to Form S-8 (No. 33-35343) of ALLTEL
Corporation filed with the Commission on June 11, 1990).
(i) ALLTEL Corporation Performance Incentive Compensation *
Plan as amended, effective January 1, 1993 (Exhibit 10(i)
to Form SE dated February 17, 1993).
(j) ALLTEL Corporation Long-Term Performance Incentive *
Compensation Plan, as amended and restated effective
January 1, 1993 (Exhibit 10(j) to Form SE dated
February 17, 1993).
(j)(1) Amendment No. 1 to ALLTEL Corporation Long-Term *
Performance Incentive Compensation Plan as amended and
restated effective January 1, 1993, incorporated herein
by reference to Exhibit 10(j)(1) to Amendment No. 1 to
Form 10-K for the fiscal year ended December 31, 1993).
(k) ALLTEL Corporation Pension Plan (January 1, 1994 Restatement) *
(incorporated herein by reference to Exhibit 10(k)
to Form 10-K for the fiscal year ended December 31, 1994).
(k)(1) Amendment No. 1 to ALLTEL Corporation Pension Plan *
(January 1, 1994 Restatement) (incorporated herein
by reference to Exhibit 10(k)(1) to Form 10-Q for
the period ended March 31, 1995).
(k)(2) Amendments No. 2 and 3 to ALLTEL Corporation Pension Plan *
(January 1, 1994 Restatement) (incorporated herein by
reference to Exhibit 10(k)(2) to Form 10-Q for the
period ended June 30, 1995).
* Incorporated herein by reference as indicated.
24
<PAGE>
EXHIBIT INDEX, Continued
Number and Name Page
(10)(k)(3) Amendments No. 4 and 5 to ALLTEL Corporation Pension Plan *
(January 1, 1994 Restatement) (incorporated herein by
reference to Exhibit 10(k)(3) to Form 10-K for
the fiscal year ended December 31, 1995).
(k)(4) Amendments No. 6 and 7 to ALLTEL Corporation Pension Plan *
(January 1, 1994 Restatement) (incorporated herein by
reference to Exhibit 10(k)(4) to Form 10-Q for the
period ended September 30, 1996).
(l) ALLTEL Corporation Profit-Sharing Plan (January 1, 1994 *
Restatement) (incorporated herein by reference to
Exhibit 10(l) to Form 10-K for the fiscal
year ended December 31, 1994).
(l)(1) Amendments No. 1 and 2 to ALLTEL Corporation *
Profit-Sharing Plan (January 1, 1994 Restatement)
(incorporated herein by reference to Exhibit 10(l)(1)
to Form 10-Q for the period ended June 30, 1995).
(l)(2) Amendments No. 3 and 4 to ALLTEL Corporation *
Profit-Sharing Plan (January 1, 1994 Restatement)
(incorporated herein by reference to Exhibit 10(l)(2)
to Form 10-K for the fiscal year ended December 31, 1995).
(l)(3) Amendment No. 5 to ALLTEL Corporation Profit-Sharing Plan *
(January 1, 1994 Restatement) (incorporated herein by
reference to Exhibit 10(l)(3) to Form 10-Q for the
period ended September 30, 1996).
(m) ALLTEL Corporation Benefit Restoration Plan *
(January 1, 1996 Restatement). (incorporated herein by
reference to Exhibit 10(m) to Form 10-K for the fiscal
year ended December 31, 1995).
(n) Amended and Restated ALLTEL Corporation Supplemental *
Medical Expense Reimbursement Plan (incorporated herein
by reference to Exhibit 10(p) to Form 10-K for the
fiscal year ended December 31, 1990).
(o) ALLTEL Corporation Thrift Plan (January 1, 1994 Restatement) *
(incorporated herein by reference to Exhibit 10(p) to
Form 10-K for the fiscal year ended December 31, 1994).
(o)(1) Amendments No. 1 and 2 to ALLTEL Corporation Thrift Plan *
(January 1, 1994 Restatement) (incorporated herein by
reference to Exhibit 10(p)(1) to Form 10-Q for the
period ended June 30, 1995).
(o)(2) Amendment No. 3 ALLTEL Corporation Thrift Plan *
(January 1, 1994 Restatement) (incorporated herein by
reference to Exhibit 10(o)(2) to Form 10-K for the
fiscal year ended December 31, 1995).
(o)(3) Amended and Restated Amendment No. 4 and Amendment No. 5 to 82
ALLTEL Corporation Thrift Plan (January 1, 1994 Restatement)
* Incorporated herein by reference as indicated.
25
<PAGE>
EXHIBIT INDEX, Continued
Number and Name Page
(11) Statement re computation of per share earnings. 27
(13) Annual report to stockholders for the year ended 32
December 31, 1996. Such report, except for the portions
incorporated by reference herein, is furnished for the
information of the Securities and Exchange Commission
and is not "filed" as part of this report.
(21) Subsidiaries of the registrant. 28
(23) Consents of experts and counsel. 31
(27) Financial Data Schedule for the year ended 119
December 31, 1996.
(99)(a) Annual report on Form 11-K for the ALLTEL Corporation --
Thrift Plan for the year ended December 31, 1996,
will be filed by amendment.
* Incorporated herein by reference as indicated.
26
<TABLE>
<CAPTION>
EXHIBIT 11
ALLTEL CORPORATION
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(Dollars and Shares in Thousands, except per share amounts)
For the Years Ended December 31, 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net income applicable to
common shares $290,666 $353,458 $270,521 $260,439 $226,894
Adjustments for convertible securities:
preferred stocks 220 236 258 293 355
Net income applicable to common
shares, assuming conversion
of above securities $290,886 $353,694 $270,779 $260,732 $227,249
Average common shares outstanding
for the year including equivalents 190,370 190,072 189,454 187,665 185,672
Increase in shares which would
result from conversion of
convertible preferred stocks 559 603 670 755 905
Average common shares, assuming
conversion of the above securities 190,929 190,675 190,124 188,420 186,577
Earnings per share of
common stock:
Primary $1.53 $1.86 $1.43 $1.39 $1.22
Fully-diluted $1.52 $1.85 $1.42 $1.38 $1.22
Note: Amounts have been restated for mergers accounted for as a pooling-of-interests.
</TABLE>
27
EXHIBIT 21
ALLTEL Corporation
Subsidiaries of the Registrant
State of
Incorporation
TELEPHONE COMPANIES:
ALLTEL Alabama, Inc. Alabama
ALLTEL Arkansas, Inc. Arkansas
ALLTEL Carolina, Inc. North Carolina
ALLTEL Florida, Inc. Florida
ALLTEL Georgia, Inc. Georgia
ALLTEL Georgia Communications Corp. Georgia
ALLTEL Kentucky, Inc. Kentucky
ALLTEL Mississippi, Inc. Mississippi
ALLTEL Missouri, Inc. Missouri
ALLTEL New York, Inc. New York
ALLTEL Ohio, Inc. Ohio
ALLTEL Oklahoma, Inc. Arkansas
ALLTEL Pennsylvania, Inc. Pennsylvania
ALLTEL South Carolina, Inc. South Carolina
ALLTEL Tennessee, Inc. Tennessee
CP National Corporation California
Georgia ALLTEL Communicon Co. Illinois
Georgia ALLTELCOM Co. Indiana
Georgia ALLTEL Telecom Inc. Michigan
Oklahoma ALLTEL, Inc. Oklahoma
Sugar Land Telephone Company Texas
Texas ALLTEL, Inc. Texas
The Western Reserve Telephone Company Ohio
28
<PAGE>
EXHIBIT 21
ALLTEL Corporation
Subsidiaries of the Registrant, continued
State of
Incorporation
OTHER COMPANIES:
ALLTEL Communications, Inc. Delaware
ALLTEL Communications Group, Inc. Delaware
ALLTEL Corporate Services, Inc. Delaware
ALLTEL Distribution, Inc. Delaware
ALLTEL Holding, Inc. Delaware
ALLTEL International Holdings, Inc. Delaware
ALLTEL Mobile Communications, Inc. Delaware
ALLTEL Mobile Communications of Alabama, Inc. Alabama
ALLTEL Mobile Communications of Arkansas, Inc. Arkansas
ALLTEL Mobile Communications of the Carolinas, Inc. North Carolina
ALLTEL Mobile Communications of Florida, Inc. Florida
ALLTEL Mobile Communications of Georgia, Inc. Georgia
ALLTEL Mobile Communications of Missouri, Inc. Missouri
ALLTEL Mobile Communications of Nevada, Inc. Nevada
ALLTEL Mobile Communications of Northwest Arkansas, Inc. Arkansas
ALLTEL Mobile Communications of South Carolina, Inc. South Carolina
ALLTEL Mobile Communications of Southern Georgia, Inc. Georgia
ALLTEL Publishing Corporation Ohio
ALLTEL Publishing Listing Management Corporation Pennsylvania
ALLTEL Supply, Inc. Ohio
ALLTEL Telephone Services Corporation Ohio
Alma Cellular II, Inc. Georgia
Brantley Cellular Company Georgia
Cellular Investments, Inc. Georgia
Cellular Phone of Aiken-Augusta, Inc. South Carolina
ITC Cellular Holdings, Inc. Delaware
Missouri Telephone Cellular Systems, Inc. Missouri
Pembroke Cellular Company II, Inc. Georgia
Planters Cellular Company Georgia
Southwest Missouri Cellular, Inc. Delaware
Statesboro Cellular Company, Inc. Georgia
Control Communications Industries, Inc. Delaware
Dynalex, Inc. California
HWC Distribution Corp. Delaware
Houston Wire & Cable Company Texas
Ocean Technology, Inc. California
OTI International, Inc. California
SLT Communications Supply Company Texas
SLT Communications Construction & Sales Company Texas
Sygnis, Inc. Arkansas
Worldwide Electrical Sales, Inc. Texas
29
<PAGE>
EXHIBIT 21
ALLTEL Corporation
Subsidiaries of the Registrant, continued
Country or
State of
Incorporation
OTHER COMPANIES (continued):
ALLIED Information Services of the Philippines, Inc. Philippines
ALLTEL Information Services, Inc. Delaware
ALLTEL Information Services International, Ltd. Delaware
ALLTEL Information Services International Holdings, Inc. Delaware
ALLTEL Information Services, Limited United Kingdom
ALLTEL Information Services (France) SARL France
ALLTEL Information Services (Germany) GmbH Germany
ALLTEL Information Services (Hong Kong) Limited Hong Kong
ALLTEL Information (Mauritius) Inc. Mauritius
ALLTEL Information Services (Netherlands) BV Amsterdam
ALLTEL Information Services (Thailand) Limited Thailand
ALLTEL International, Limited Jamaica
ALLTEL International Resource Management, Inc. Delaware
ALLTEL Servicios de Informacion (Costa Rica) S.A. Costa Rica
Computer Power, Inc. Florida
CPI Datanet, Inc. Delaware
Vertex Banking Systems, Limited United Kingdom
Vertex Business Systems, Inc. New York
30
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
ALLTEL Corporation:
As independent public accountants, we hereby consent to the
incorporation of our report incorporated by reference in this
Form 10-K, into the Company's previously filed Registration
Statements, File Nos. 2-99523, 33-35343, 33-48476, 33-51047,
33-54175, 33-56291 and 33-65199.
/S/ARTHUR ANDERSEN LLP
Little Rock, Arkansas,
February 25, 1997.
31
EXHIBIT 13
PORTIONS OF ANNUAL REPORT TO STOCKHOLDERS
FOR THE YEAR ENDED DECEMBER 31, 1996
(incorporated by reference into this filing)
Form 10-K
Page Number
Management's Discussion and Analysis of Financial 33-44
Condition and Results of Operations
Report of Independent Public Accountants 45
Selected Financial Data 46
Consolidated Statements of Income 47
Consolidated Balance Sheets 48-49
Consolidated Statements of Cash Flows 50
Consolidated Statements of Shareholders' Equity 51
Business Segments 52
Notes to Consolidated Financial Statements 53-65
Investor Information 66
32
<PAGE>
Financial Condition, Liquidity and Capital Resources
(Dollars in millions, except per share amounts) 1996 1995 1994
Capital expenditures $463.7 $523.1 $596.1
Cash provided from operations $806.2 $689.2 $577.2
Long-term debt issued $316.0 $218.2 $404.9
Total capital structure $3,897.5 $3,741.1 $3,531.0
Percent debt to total capital 46% 48% 54%
Interest coverage ratio 4.54x 4.72x 4.58x
Book value per share $11.15 $10.18 $8.60
The Company's total capital structure was $3.9 billion at December 31, 1996,
compared to a total capital structure of $3.7 billion at December 31, 1995 and
$3.5 billion at December 31, 1994. 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 from operations, which continues to be the Company's primary
source of liquidity, was $806.2 million in 1996, $689.2 million in 1995 and
$577.2 million in 1994. The increase in 1996 primarily reflects a reduction
in working capital requirements and growth in earnings of the Company,
excluding the impact of certain non-cash, non-extraordinary charges, as further
discussed below. The increases in 1995 and 1994 primarily reflect the growth
in earnings of the Company, partially offset by an increase in working capital
requirements in each year. Cash from investing activities for both 1996 and
1995 includes proceeds totaling $38.7 million and $212.9 million, respectively,
which were received principally from the sale of telephone properties, as
discussed below. Cash from investing activities for 1996 also includes proceeds
of $30.4 million related to the withdrawal of the Company's investment in GO
Communications Corporation ("GOCC"). The Company's 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 ("FCC"). 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 in 1996
were $463.7 million compared to $523.1 million in 1995 and $596.1 million in
1994. The decreases in 1996 and 1995 primarily reflect both the sale of
telephone properties and a reduction in capital expenditures by the telephone
subsidiaries. The Company financed the majority of its capital expenditures
through the internal generation of funds in each of the past three years.
During each of the past three years, 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. Capital expenditures are forecast at $490.4 million for 1997,
which are expected to be primarily internally financed. Common and preferred
dividend payments amounted to $198.1 million in 1996, $182.3 million in 1995
and $166.3 million in 1994. The increases in each year primarily reflect
growth in the annual dividend rates on the Company's common stock. In October
1996, the Board of Directors approved a 6 percent increase in the quarterly
dividend from 26 cents to 27.5 cents per share. This action raised the
annualized dividend to $1.10 per share and marked the 36th consecutive year in
which the Company has increased its common stock dividend.
33
<PAGE>
On October 21, 1996, the Company announced its plans to repurchase up to
3.5 million shares of ALLTEL Corporation common stock. Through
December 31, 1996, the Company had repurchased 2,440,000 of its shares at a
total cost of $75.6 million. In addition, the Company participated in the FCC's
"D" and "E" band PCS auctions, and on January 14, 1997, the Company was
awarded the PCS licensing rights for 73 markets in 12 states. When issued by
the FCC, the PCS licenses will enable the Company to increase the size of its
potential wireless customer base to 34 million. In addition, the PCS licenses
will increase the overlap of the Company's system-wide wireline and wireless
service areas from 25 percent to 55 percent. The Company will pay
approximately $144 million to obtain the PCS licenses. The Company believes it
has the capital resources available to fund the construction of its PCS
network.
On October 11, 1996, the Company entered into an amended and restated
revolving credit agreement in the amount of $750 million. The new agreement,
which includes provision for annual extensions, has a five-year term with an
initial termination date of October 1, 2001. Total borrowings outstanding under
the Company's revolving credit agreement at December 31, 1996, 1995 and 1994
were $83.7 million, $151.5 million and $132.0 million, respectively. Borrowings
under this agreement in 1996 were incurred to fund the stock repurchase
program, for the expansion of cellular investments and for general corporate
requirements. The weighted average interest rate on borrowings outstanding
under this agreement at December 31, 1996, was 7.1 percent.
During 1996, the Company and its subsidiaries issued long-term debt of
$316.0 million, compared to $218.2 million in 1995 and $404.9 million in 1994.
Long-term debt retired in 1996 amounted to $310.3 million, compared to
$277.6 million in 1995 and $147.8 million in 1994. 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 retirement of the $200 million debentures and the
reduction in revolving credit agreement borrowings represent the majority of
long-term debt retired in 1996. The issuance by the Company in September 1995
of $200 million of 6.75 percent debentures to refinance existing high-cost
indebtedness, consisting of $150 million of 10.375 percent debentures and
$50 million of 8.875 percent debentures, represents substantially all of the
long-term debt issued in 1995. The retirement of the 10.375 percent and 8.875
percent debentures completed in October 1995 represents the majority of
long-term debt retired in 1995. The issuance by the Company of $250 million of
7.25 percent debentures to reduce borrowings under its revolving credit
agreement, and the issuance by subsidiaries of $60 million of 8.05 percent
notes and $30 million of 8.17 percent notes to refinance existing high-cost
indebtedness represent the majority of long-term debt issued in 1994. In
connection with the debt refinancings completed in March 1996 and October 1995,
the Company was required to pay termination fees in the amount of $15.8 million
and $14.0 million, respectively; however, the two debt refinancings are
expected to produce approximately $10.5 million in annual pretax interest
savings. The remaining borrowings for the three years were used for
investments, acquisitions and other general corporate requirements. The loans
were obtained through the private placement market, public issuance and the
Rural Utilities Service financing programs for telephone companies. The Company
and its subsidiaries expect these sources to continue to be available for
future borrowings. There were no changes in the Company's bond ratings during
1996. Moody's Investors Service and Standard & Poor's Corporation senior debt
ratings for the Company are A2 and A+, respectively. (See Note 3 to the
Consolidated Financial Statements for additional information regarding
the Company's long-term debt.)
27
34
<PAGE>
Results of Operations
Overview
During 1996, the Company continued to implement initiatives designed to enhance
its ability to compete effectively in today's changing business environment, to
provide new or enhanced service offerings to a broader array of customers and
to pursue new growth opportunities. In addition, the Company announced its
plans to dispose of certain non-strategic operations within its product
distribution and information services segments. Operating results for 1996
reflect the impact of several of these initiatives. In preparation for
heightened competition in the telecommunications industry, the Company
completed the sale of certain non-strategic telephone properties and enhanced
its service offerings, including long-distance service. Telephone's operating
results remained solid, reflecting steady access line growth in its remaining
service areas and the Company's ongoing cost-control efforts. Cellular produced
strong operating results, reflecting significant growth in its customer base.
Information services' operating results reflected an increase in revenues and
sales primarily due to growth in existing data processing contracts and the
addition of several new outsourcing agreements, while operating income was
impacted by write-downs in the carrying value of certain assets. Although
product distribution's revenues and sales increased slightly, operating income
decreased primarily due to lower profit margins, reflecting the impact of
increased competition and a decline in copper prices.
In 1996, revenues and sales increased to $3,192.4 million, up from
$3,109.7 million in 1995 and $2,927.7 million in 1994. This represents an
increase of 3 percent in 1996 compared to increases of 6 percent in 1995 and
26 percent in 1994. Total costs and expenses increased to $2,600.8 million, up
from $2,425.7 million in 1995 and $2,293.8 million in 1994. This represents an
increase of 7 percent in 1996 compared to increases of 6 percent in 1995 and
27 percent in 1994. Included in costs and expenses for 1996 are non-cash
charges of $120.3 million to write-down the carrying value of goodwill, certain
capitalized software development costs and other assets, as further discussed
below. Primarily as a result of these asset write-downs, the Company's
consolidated net income for 1996 decreased to $291.7 million, compared to
$354.6 million in 1995 and $271.8 million in 1994, a decrease of 18 percent in
1996, compared to increases of 30 percent in 1995 and 4 percent in 1994.
Earnings per share in 1996 also decreased to $1.53, compared to $1.86 in 1995
and $1.43 in 1994, reflecting a decrease of 18 percent in 1996, compared to
increases of 30 percent in 1995 and 3 percent in 1994.
In addition to the asset write-downs, the 1996 results also include a
pretax net loss of $2.3 million related to the payment of termination fees
resulting from the early termination of long-term debt, the loss incurred on
the withdrawal of the investment in GOCC, partially offset by a gain on the
sale of telephone properties in Nevada. The 1995 results include a pretax net
gain in the amount of $30.8 million related to the sale of certain telephone
properties, a write-down of the information services check processing
operations and the payment of termination fees resulting from the early
retirement of long-term debt. Excluding the impact of all non-extraordinary,
one-time items, the Company's 1996 consolidated results from operations showed
solid growth, with net income increasing 9 percent to $365.9 million and
earnings per share also increasing 9 percent to $1.92. (The net income impact
of the non-extraordinary, one-time items has been provided as supplemental
information only.)
Telephone Operations
(Dollars in millions) 1996 1995 1994
Revenues and sales $1,169.1 $1,197.7 $1,178.3
Operating income $408.4 $422.5 $400.2
Access lines in service 1,681,395 1,623,440 1,643,041
35
<PAGE>
Telephone's revenues and sales decreased $28.6 million or 2 percent in 1996,
compared to increases of $19.4 million or 2 percent in 1995 and $162.2 million
or 16 percent in 1994. Operating income decreased $14.1 million or 3 percent
in 1996, compared to increases of $22.3 million or 6 percent in 1995 and
$47.0 million or 13 percent in 1994.
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 a telephone property serving 3,600 access
lines in Pennsylvania. 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 those in Nevada was completed during the fourth quarter of
1995, and the sale of properties in Nevada was completed in March 1996. The
sale of properties resulted in the recognition of pretax gains of $15.3 million
in 1996 and $49.8 million in 1995. In 1996, the sale of properties to Citizens
resulted in decreases in revenues and sales and operating income of $88.5
million and $31.7 million, respectively, while in 1995, the disposition of
properties resulted in decreases in revenues and sales and operating income of
$24.0 million and $7.2 million, respectively. Excluding the impact of the sale
of properties to Citizens, telephone's revenues and sales would have increased
$59.9 million or 5 percent in 1996 and $43.4 million or 4 percent in 1995, and
operating income would have increased $17.6 million or 4 percent in 1996 and
$29.5 million or 7 percent in 1995.
In the fourth quarter of 1993, the Company purchased all the assets of the
telephone operations of GTE Corporation in 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
Company's financial statements as of November 1, 1993. This acquisition
accounted for 14 percent of the increase in both revenues and sales and
operating income in 1994.
Local service revenues increased $17.9 million or 4 percent in 1996,
compared to increases of $21.7 million or 6 percent in 1995 and $79.3 million
or 26 percent in 1994. The increases in local service revenues in 1996 and 1995
reflect growth in customer access lines and custom calling feature revenues,
partially offset by the reduction in revenues from the sale of telephone
properties to Citizens. Customer access lines, net of lines sold to Citizens,
increased more than 5 percent in 1996, reflecting increased sales of
residential and second access lines. Local service revenues increased in 1994
primarily due to the GTE Georgia acquisition. Increases in customer lines and
growth in custom calling feature revenues also contributed to the growth in
local service revenues in 1994. There were no local rate increases granted to
any of the Com-pany's telephone subsidiaries in 1996, nor are there any rate
requests currently pending before regulatory commissions. The Company does not
anticipate filing for any local rate increases during 1997. Future access line
growth is expected to result from population growth in the Company's service
areas, from sales of second access lines and through strategic acquisitions.
Network access and long-distance revenues decreased $42.2 million or
7 percent in 1996, decreased $6.3 million or 1 percent in 1995 and increased
$62.5 million or 11 percent in 1994. The decrease in network access and
long-distance revenues in 1996 primarily reflects the sale of properties to
Citizens, partially offset by higher volumes of access usage and additional
revenues derived from the Company's start-up, long-distance operations. In
1996, the Company began offering long-distance service to its customers in
selected service areas, and as of the end of the year, the Company provided
service to more than 134,000 customers in 13 states. 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 intrastate network access charges by $24 million,
prospectively. The Georgia PSC's action was in response to the Company's
28
36
<PAGE>
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
appealed the Georgia PSC order. On November 6, 1996, the superior court of
Fulton County, Georgia, rendered its decision regarding the Company's appeal
and reversed the Georgia PSC order. Network access and long-distance revenues
decreased in 1995 primarily due to the impact of certain regulatory commission
actions designed to reduce earnings levels in California and Ohio and the sale
of telephone properties to Citizens. Network access and long-distance revenues
increased in 1994 primarily due to the GTE Georgia acquisition. Increases in
universal service fund revenues and higher volumes of access usage also
contributed to the growth in network access and long-distance revenues in 1994.
The increase in revenues for 1994 was partially offset by the impact of
changing from an average schedule to cost method of settling interstate access
revenues by two of the Company's telephone operating subsidiaries.
Miscellaneous revenues decreased $4.3 million or 3 percent in 1996,
compared to increases of $4.0 million or 3 percent in 1995 and $20.4 million
or 16 percent in 1994. The decrease in miscellaneous revenues in 1996 primarily
reflects the sale of properties to Citizens, partially offset by increases in
directory advertising revenues and direct sales of telephone equipment and
telephone equipment maintenance and protection plans. The increase in
miscellaneous revenues in 1995 was primarily due to increases in direct sales
of telephone equipment and protection plans and directory advertising revenues,
partially offset by a reduction in revenues due to the sale of properties to
Citizens. The increase in miscellaneous revenues in 1994 was primarily due to
the GTE Georgia acquisition and increases in directory advertising revenues.
Total telephone operating expenses decreased $14.5 million or 2 percent in
1996, decreased $2.9 million or 1 percent for 1995 and increased $115.2 million
or 17 percent in 1994. Operating expenses decreased in 1996 and 1995 by
approximately $56.8 million and $16.8 million, respectively, as a result of
the sale of properties to Citizens. The 1996 decrease in operating expenses
attributable to the sale of properties to Citizens was partially offset by
start-up costs associated with the long-distance operations and by increased
expense for maintenance and repair of cable, digital electronic switching and
circuit equipment, and an increase in depreciation expense. Operating expenses
decreased in 1995 primarily due to the sale of properties to Citizens. Lower
maintenance costs related to buildings and electro- mechanical switching
equipment and decreases in call completion and other general and administrative
expenses, reflecting the Company's ongoing cost-control efforts, also
contributed to the decrease in operating expenses in 1995. These decreases
were partially offset by higher expense for maintenance and repair of cable,
increased information services and engineering charges, increased depreciation
expense and increased cost of products sold related to the direct sales of
telephone equipment and protection plans. The acquisition of the GTE Georgia
properties accounted for 14 percent of the increase in operating expenses in
1994. In addition to the impact of the GTE Georgia acquisition, operating
expenses increased in 1994 due to higher expense for maintenance and repair of
cable, digital switching and circuit equipment, and an increase in cost of
products sold related to the sales of telephone equipment and protection plans.
The increase in 1994 was partially offset by lower maintenance costs related
to electro-mechanical switching equipment and by a reduction in accounting,
financial and human resource management expenses resulting from the
consolidation of the Company's telephone operations.
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 could be material. Criteria
that would give rise to the discontinuance of SFAS 71 include (1)
37
<PAGE>
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. As a result of the
passage of the Telecommunications Act of 1996 (the "96 Act"), the Company's
telephone subsidiaries could begin to experience increased competition in their
local service areas. Presently, competition has not had a significant adverse
effect on the operations of the Company's telephone subsidiaries. In
August 1996, as required by the 96 Act, the FCC issued regulations establishing
pricing rules for interconnection of telecommunications carriers' networks and
for provisioning of unbundled network services. These regulations were
challenged by various telecommunications carriers in the federal courts, and in
October 1996, the U.S. Eighth Circuit Court of Appeals issued a stay of the
FCC's pricing rules pending the outcome of the appeal process. In addition, FCC
regulations to implement various other provisions of the 96 Act relating to
access charges, collocation of equipment on local exchange carriers' networks
and subsidizing of universal service have not yet been finalized. Accordingly,
the Company cannot predict at this time the specific effects that the 96 Act
and future competition will have on its telephone operations. However, the
Company is intent on taking advantage of the various opportunities that
competition should provide.
Cellular Operations
(Dollars in millions) 1996 1995 1994
Revenues and sales $475.1 $398.1 $287.3
Operating income $151.7 $121.5 $84.7
Total customers 795,136 624,542 468,542
Cellular operations provided strong operating results and contributed
significantly to the Company's overall earnings growth. Revenues and sales
increased $77.0 million or 19 percent for 1996, compared to increases of
$110.8 million or 39 percent in 1995 and $106.3 million or 59 percent in 1994.
Operating income increased $30.2 million or 25 percent in 1996, $36.8 million
or 44 percent in 1995 and $40.4 million or 91 percent in 1994.
Subscriber growth remained strong, as the number of cellular customers at
year-end 1996 totaled 795,136, an increase of 170,594 customers or 27 percent
over 1995. This compares to an annual growth rate in subscribers of 33 percent
in 1995 and 70 percent in 1994. While the rate of subscriber growth has
declined since 1994, the overall market penetration rate (number of customers
as a percentage of the total population in the Company's service areas) has
increased from 5.9 percent at December 31, 1994, to 9.4 percent at
December 31, 1996.
Cellular revenues and sales increased in all periods primarily due to the
significant growth in its customer base. The acquisition of new cellular
properties and increased ownership interest in existing cellular properties
also contributed to the growth in revenues and sales in all periods. Partially
offsetting the increases in revenues resulting from subscriber growth were
declines in the average monthly revenue per subscriber. Average revenue per
subscriber per month was $59 for 1996, $63 for 1995 and $67 for 1994. The
declines in revenue per subscriber 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 1996 was also impacted by increases in
uncollectible revenues, reflecting increased write-offs from bad debts.
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 in 1996. The
increases in operating income for all periods were partially offset by higher
expenses for selling and advertising, depreciation and other operating
expenses. Growth in operating income in 1996 was also impacted by increased
29
38
<PAGE>
losses sustained from fraud. The Company has implemented new technologies and
enhanced credit and collection procedures in order to reduce future losses
incurred from both fraud and bad debts.
Cellular operations are expected to continue producing double-digit growth
rates in revenues and operating income in 1997. In addition, as previously
noted, the Company was a successful bidder in the FCC's "D" and "E" band PCS
auctions, obtaining licenses for 73 markets in 12 states. These PCS licensing
rights will increase the Company's potential wireless customer base to
34 million "POPs." The Company is currently developing its PCS network
deployment plans.
Information Services Operations
(Millions) 1996 1995 1994
Revenues and sales $959.1 $926.3 $861.5
Operating income $67.0 $132.0 $129.8
Information services' revenues and sales reflect increases of $32.8 million or
4 percent in 1996, $64.8 million or 8 percent in 1995 and $183.7 million or
27 percent in 1994. The increase in revenues and sales in 1996 primarily
resulted from growth in the telecommunications outsourcing business, reflecting
volume growth in existing data processing contracts and the addition of new
outsourcing agreements. Additional software maintenance and service revenues
and growth in new and existing financial and healthcare outsourcing contracts
also contributed to the increase in revenues and sales in 1996. These
increases were partially offset by the sale of check processing operations
completed in September 1995 and by a reduction in revenues earned on an
outsourcing agreement accounted for under the percentage-of-completion method.
Revenues and sales increased in 1995 primarily due to growth in
telecommunications and healthcare outsourcing operations. Telecommunications
revenues increased primarily due to volume growth in existing data processing
contracts and the addition of an outsourcing contract with Citizens. Healthcare
revenues increased primarily due to an acquisition completed in November 1994
accounted for as a purchase. Additional software maintenance revenues also
contributed to the increase in revenues and sales in 1995. Revenues and sales
increased in 1994 primarily due to new facilities management and remote
processing contracts including telecommunications, additional services provided
under existing facilities management contracts, an increase in the number of
mortgage loans processed and related reporting services, and additional fees
associated with specialized programming and software conversions. An
acquisition completed in October 1993 accounted for as a purchase also
contributed to the increase in revenues and sales in 1994. The increases in
revenues and sales in all periods were partially offset by lost operations from
contract terminations due 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. Although the number of
mortgage loans serviced increased in all periods, growth in the related
processing revenues has occurred at a slower rate due to consolidations in the
mortgage industry, which have resulted in lower incremental revenues realized
on a per-loan basis. The domestic banking industry continues to experience a
high level of consolidation due to mergers.
During the third quarter of 1996, information services recorded a pretax
write-down of $53.0 million in the carrying value of certain assets, primarily
consisting of capitalized software development costs. The write-down of
software resulted from a net realizability evaluation of software-related
products that have been impacted by changes in software and hardware
technologies, including a shift from mainframe to client/server-based
applications. In addition, due to current and projected future operating losses
sustained by the community banking operations, information services also
39
<PAGE>
recorded a pretax write-down of $22.0 million to adjust the carrying value of
these operations to their estimated fair value based upon projections of future
cash flows. The Company plans to dispose of or discontinue these operations by
the end of 1997. Primarily as a result of these write-downs, operating income
decreased $65.0 million or 49 percent in 1996, compared to increases of
$2.2 million or 2 percent in 1995 and $13.2 million or 11 percent in 1994.
Excluding the impact of the third quarter write-downs, operating income would
have increased $10.0 million or 8 percent in 1996.
Excluding the impact of the third quarter write-downs, the increase in
operating income in 1996 reflects the increase 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 in 1996 was also impacted by start-up
costs associated with the Enterprise Network Services business unit, which was
established in May 1996 to offer network consulting, implementation and
operations support services to customers across all the Company's vertical
markets. The increase in operating income in 1995 reflects the growth in
revenues and sales 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 operating costs including
corporate operations and depreciation and amortization expense. The increase
in corporate operations reflects severance pay costs related to a workforce
reduction announced in June 1995. Operating income increased in 1994 primarily
due to the revenue increases previously noted. The increase in operating income
in 1994 reflects the growth in revenues and sales offset by the loss of
higher-margin operations due to contract terminations, reductions in fees
collected on the early termination of facilities management contracts,
operating losses sustained by the check processing and community banking
operations, and increased operating costs including depreciation and
amortization expense. Operating income for 1995 and 1994 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 due to the acquisition of additional data processing
equipment and an increase in the amortization of internally developed software.
As a result of declining contributions from the check processing and
community banking operations, in December 1994, the Company recorded a pretax
write-down of approximately $54.2 million to reflect the estimated net
realizable value of these operations. In accordance with the Company's plan for
disposal of the check processing operations, the Company recorded an additional
$5.0 million pretax write-down in the second quarter of 1995 to reflect the net
realizable value of these operations. The Company completed the sale of the
check processing operations at the end of the third quarter of 1995.
On January 24, 1997, the Company announced the sale of information
services' healthcare operations. In 1996, these operations represented
approximately 11 percent and 2 percent of information services' revenues and
sales and operating income, respectively.
Product Distribution Operations
(Millions) 1996 1995 1994
Revenues and sales $452.4 $448.1 $436.6
Operating income $23.7 $27.3 $23.9
Product distribution's revenues and sales increased $4.3 million or 1 percent
in 1996, compared to increases of $11.5 million or 3 percent in 1995 and
$65.9 million or 18 percent in 1994. Operating income decreased $3.6 million
or 13 percent in 1996, compared to increases of $3.4 million or 14 percent in
1995 and $6.9 million or 41 percent in 1994.
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<PAGE>
The increase in revenues and sales in 1996 was primarily due to growth in
sales of telecommunications and data products to non-affiliated customers,
including increased retail sales of these products at counter showrooms. Sales
of telecommunications and data products to affiliates decreased $18.1 million
compared to the prior year, as detailed in Note 1 to the Consolidated Financial
Statements. The decrease in sales to affiliates reflects both the sale of
properties to Citizens and an overall reduction in capital expenditures by the
remaining telephone subsidiaries, as compared to the prior year. Sales of
electrical wire and cable products also decreased slightly in 1996. The
increase in revenues and sales in 1995 was primarily due to growth in the sale
of telecommunications and data products. Revenues and sales increased in 1994
primarily due to growth in the sale of telecommunications and data products to
new and existing customers, including sales to affiliates. Sales of electrical
wire and cable products also increased in 1994, reflecting increased copper
prices and a slightly higher demand for these products. The product
distribution companies continue to experience substantial competition in their
sales territories from other distribution companies and from direct sales by
manufacturers.
The decrease in operating income in 1996 primarily reflects lower profit
margins realized on the sale of electrical wire and cable products. During
1996, gross profit margins for electrical wire and cable products were
adversely impacted by sharp declines in copper prices, compared to the prior
year. Gross profit margins have also been impacted by increased competition,
primarily from direct sales by manufacturers. Operating income increased in
1995 and 1994 primarily due to the increase in revenues and sales previously
noted, partially offset by an increase in selling-related expenses. Increased
profit margins on electrical wire and cable products, primarily resulting from
an increase in copper prices, also contributed to the growth in operating
income in 1995 and 1994.
During the third quarter of 1996, the Company recorded a pretax write-down
of $45.3 million in the carrying value of goodwill related to its wire and
cable subsidiary, HWC Distribution Corp. ("HWC"). This write-down resulted
from the Company's plan to dispose of this non-strategic operation. The
Company expects to complete the sale of HWC in 1997. The impact of this
write-down has been included in corporate operating expenses for 1996.
Other Operations
(Millions) 1996 1995 1994
Revenues and sales $136.8 $139.5 $163.9
Operating income $11.3 $7.0 $15.3
Other operations revenues and sales decreased $2.7 million or 2 percent in
1996, decreased $24.4 million or 15 percent in 1995, and increased
$87.6 million or 115 percent in 1994. Operating income increased $4.3 million
or 60 percent in 1996, decreased $8.3 million or 54 percent in 1995, and
increased $6.1 million or 66 percent in 1994.
Revenues and sales decreased in 1996 due to a reduction in directory
publishing revenues, primarily resulting from the loss of several large
independent directory contracts. The decrease in revenues and sales was
partially offset by the receipt of a one-time settlement from GTE Directories
Corporation ("GTE Directories") for reimbursement of certain computer software
conversion costs incurred by the Company subsequent to its purchase of GTE
Directories' independent telephone directory operations. Revenues and sales
decreased in 1995 primarily due to a change in accounting in late 1993 related
to the publication of telephone directories. Concurrent with the purchase of
the independent telephone directory operations of 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 year ended December 31, 1994, include
41
<PAGE>
approximately $16.0 million of additional revenues related to directories
accounted for under the previous method. Revenues and sales also decreased in
1995 by approximately $11.0 million as a result of a reduction in the number of
directories published. The increase in revenues and sales in 1994 was primarily
due to the significant growth in the Company's publishing operations
attributable to the purchase of the GTE directory publishing operations. As a
result of this acquisition, the number of directories published during 1994
increased 134 percent.
The increase in operating income in 1996 reflects the impact of the
one-time settlement received from GTE Directories, elimination of certain
amounts paid to GTE Directories and improved collection experience related to
directory advertising revenues. The Company's publishing subsidiary had
contracted with GTE Directories to receive directory advertising sales support,
printing and other services. In 1996, these sales and service functions were
performed at a lower cost internally by the Company's publishing subsidiary.
Operating income decreased in 1995 primarily due to the decrease in
revenue and sales previously noted. Operating income for 1995 also reflects
lower margins realized on directories published for affiliates. The lower
margins resulted from increased fees paid to affiliates for publishing rights
under the terms of a new contract that became effective January 1, 1995.
Operating income increased in 1994 primarily due to the increase in revenues
and sales, partially offset by increases in directory services expense,
contract services, and selling and marketing expenses related to the
publication of additional independent directories.
Other Income, Net
Other income, net increased $0.4 million or 18 percent in 1996, increased
$8.5 million or 141 percent in 1995 and decreased $8.3 million in 1994. The
increases in 1996 and 1995 were primarily due to an increase in the equity
income recognized on investments in cellular limited partnerships, partially
offset by an increase in the minority interest in earnings of the Company's
cellular operations by others. Other income, net for 1996 also reflects a
decrease in capitalized interest costs related to long-term construction
projects, consistent with the overall decrease in the Company's capital
expenditures. Also contributing to the increase in other income, net for 1995
was an increase in capitalized interest costs related to long-term construction
projects. In addition, other income, net for 1995 does not include the
amortization of telephone plant acquisition adjustments related to the GTE
Georgia properties acquisition that were reclassified as depreciation and
amortization expense in 1995. The decrease in 1994 was primarily due to an
increase in the minority interest in earnings of the Company's cellular
operations by others and the amortization of telephone plant acquisition
adjustments related to the GTE Georgia properties acquisition, partially offset
by an increase in equity income recognized on investments in cellular limited
partnerships.
Interest Expense
Interest expense decreased $14.6 million or 10 percent in 1996, compared to
increases of $8.3 million or 6 percent in 1995 and $38.4 million or 39 percent
in 1994. The decrease in interest expense in 1996 primarily reflects the two
debt refinancings completed in March 1996 and October 1995, which resulted in
the retirement of three high-cost debt issues and reduced borrowings under the
Company's revolving credit agreement, as previously discussed. Interest expense
in 1996 also reflects lower average borrowing rates for amounts outstanding
during the year under the Company's revolving credit agreement. The increase
in interest expense in 1995 reflects the issuance of $250 million of debentures
in April 1994 to reduce borrowings under the Company's revolving credit
agreement, partially offset by the reduction in interest expense resulting
from the refinancing of $200 million of debentures completed in October 1995.
The increase in interest expense in 1994 reflects both the issuance of the
$250 million of debentures in April 1994 and the issuance of $400 million of
31
42
<PAGE>
debentures in November 1993 to finance the GTE Georgia acquisition.
Provision to Reduce Carrying Value of Certain Assets
During the third quarter of 1996, the Company incurred non-cash, pretax charges
of $120.3 million to write down the carrying value of certain assets. In
accordance with the Company's plan to dispose of its wire and cable subsidiary,
the Company recorded a pretax write-down of goodwill in the amount of
$45.3 million. In addition, information services recorded a pretax write-down
of $53.0 million in the carrying value of certain assets primarily consisting
of capitalized software development costs. The write-down of software resulted
from performing a net realizability evaluation of software-related products
that have been impacted by changes in software and hardware technologies.
Information services also recorded a pretax write-down of $22.0 million to
adjust the carrying value of its community banking operations to their
estimated fair value based upon projections of future cash flows. The Company
plans to dispose of or discontinue these operations by the end of 1997. The
net income impact of these write-downs resulted in a decrease in net income of
$72.7 million or $.38 per share for the year ended December 31, 1996.
Gain on Disposal of Assets, Write-down of Assets and Other
During the first quarter of 1996, the Company recorded a pretax 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 year ended
December 31, 1996.
In 1995, the Company recorded pretax gains totaling $49.8 million from the
disposal of certain telephone properties to Citizens. The Company also recorded
an additional pretax write-down of $5.0 million to reflect the net realizable
value of information services' check processing operations. Finally, the
Company incurred $14.0 million of termination fees related to the early
retirement of $200 million of long-term debt. The net income impact from these
transactions resulted in an increase of $19.8 million in net income and $.10
in earnings per share for the year ended December 31, 1995.
In 1994, the Company recorded a pretax write-down of $54.2 million to
reflect the estimated net realizable value of information services' community
banking and check processing operations. This write-down decreased net income
by approximately $32 million and earnings per share by $.17 per share for the
year ended December 31, 1994.
Income Taxes
Income tax expense decreased $47.5 million or 22 percent in 1996, increased
$52.4 million or 32 percent in 1995 and decreased $23.1 million or 12 percent
in 1994. The decrease in income tax expense in 1996 primarily reflects the
tax-related impact of the various one-time, non-extraordinary items, as
previously discussed. Excluding the impact on tax expense of these
transactions, income tax expense would have increased $11.8 million or
6 percent in 1996, consistent with the overall growth in the Company's earnings
from continuing operations before one-time, non-extraordinary items. The
increase in income tax expense in 1995 primarily resulted from an increase in
taxable income for financial reporting purposes. The decrease in income taxes
in 1994 was primarily due to the tax benefit resulting from the write-down of
the information services operations.
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<PAGE>
Average Common Shares Outstanding
The average number of common shares outstanding increased slightly in 1996.
During 1996, common shares issued through stock option plans amounted to
344,000 shares, and debentures and preferred stock were converted into 28,000
shares. These increases were offset by the Company's repurchase on the open
market of 2,440,000 of its common shares. The average number of common shares
outstanding increased slightly in 1995. During 1995, common shares issued
through stock option plans amounted to 1,227,000 shares, and debentures and
preferred stock were converted into 60,000 shares. The average number of common
shares outstanding increased 1 percent in 1994. In 1994, common shares issued
through stock option plans amounted to 535,000 shares, 324,000 shares were
issued for the acquisition of a subsidiary, and debentures and preferred stock
were converted into 71,000 shares. These increases were offset by the Company's
repurchase on the open market of 407,000 of its common shares.
Other Financial Information and Forward-Looking Statements
Management is currently not aware of any environmental matters which in the
aggregate would have a material adverse effect on the financial condition or
results of operations of the Company.
This Management's Discussion and Analysis of Financial Condition and
Results of Operations includes, and future filings by the Company on Form 10-K,
Form 10-Q and Form 8-K and future oral and written statements by the Company
and its management may include, certain forward-looking statements, including
(without limitation) statements with respect to anticipated future operating
and financial performance, growth opportunities and growth rates, acquisition
and divestitive opportunities and other similar forecasts and statements of
expectation. Words such as "expects," "anticipates," "intends," "plans,"
"believes," "seeks," "estimates," and "should," and variations of these words
and similar expressions, are intended to identify these forward-looking
statements. Forward-looking statements by the Company and its management are
based on estimates, projections, beliefs and assumptions of management and are
not guarantees of future performance. The Company disclaims any obligation to
update or revise any forward-looking statement based on the occurrence of
future events, the receipt of new information, or otherwise.
Actual future performance, outcomes and results may differ materially from
those expressed in forward-looking statements made by the Company and its
management as a result of a number of important factors. Representative
examples of these factors include (without limitation) rapid technological
developments and changes in the telecommunications and information services
industries; ongoing deregulation (and the resulting likelihood of significantly
increased price and product/service competition) in the telecommunications
industry as a result of the Telecommunications Act of 1996 and other similar
federal and state legislation and the federal and state rules and regulations
enacted pursuant to that legislation; regulatory limitations on the Company's
ability to change its pricing for communications services; the possible future
unavailability of SFAS 71 to the Company's telephone subsidiaries; continuing
consolidation in certain industries, such as banking, served by the Company's
information services business; and the risks associated with relatively large,
multi-year contracts in the Company's information services business. In
addition to these factors, actual future performance, outcomes and results may
differ materially because of other, more general, factors including (without
limitation) general industry and market conditions and growth rates, domestic
and international economic conditions, governmental and public policy changes
and the continued availability of financing in the amounts, at the terms and
on the conditions necessary to support the Company's future business.
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<PAGE>
Report of Independent
Public Accountants
To the Shareholders of ALLTEL Corporation:
We have audited the accompanying consolidated balance sheets of ALLTEL
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1996
and 1995, and the related consolidated statements of income, shareholders'
equity and cash flows for each of the three years in the period ended
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ALLTEL Corporation and
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
/s/Arthur Anderson LLP
Little Rock, Arkansas,
January 31, 1997
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<PAGE>
<TABLE>
<CAPTION>
Selected Financial Data
For the years ended December 31,
(Dollars in thousands, except per share amounts) 1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Revenues and Sales:
Service revenues $2,524,845 $2,441,826 $2,249,933 $1,811,808 $1,565,544 $1,371,724
Product sales 667,573 667,899 677,743 510,082 501,865 500,305
Total revenues and sales 3,192,418 3,109,725 2,927,676 2,321,890 2,067,409 1,872,029
Costs and Expenses:
Cost of products sold 448,456 449,119 422,078 332,923 344,076 345,124
Operating expenses 2,032,057 1,976,628 1,871,732 1,469,921 1,280,591 1,154,066
Provision to reduce carrying
value of certain assets 120,280 - - - - -
Total costs and expenses 2,600,793 2,425,747 2,293,810 1,802,844 1,624,667 1,499,190
Operating Income 591,625 683,978 633,866 519,046 442,742 372,839
Other income, net 2,925 2,481 (6,064) 2,230 13,364 12,117
Interest expense (130,832) (145,428) (137,120) (98,746) (93,245) (94,244)
Gain on disposal or exchange of assets,
write-down of assets and other (2,278) 30,775 (54,157) 27,390 (5,512) 8,347
Income before income taxes 461,440 571,806 436,525 449,920 357,349 299,059
Income taxes 169,703 217,190 164,772 187,903 128,713 99,633
Net income 291,737 354,616 271,753 262,017 228,636 199,426
Preferred dividends 1,071 1,158 1,232 1,578 1,742 2,543
Net income applicable
to common shares $290,666 $353,458 $270,521 $260,439 $226,894 $196,883
Primary Earnings per Share $1.53 $1.86 $1.43 $1.39 $1.22 $1.09
Dividends per common share $1.06 $.98 $.90 $.82 $.77 $.71
Common shares -
average including equivalents 190,370,000 190,072,000 189,454,000 187,665,000 185,672,000 180,007,000
at year end 187,200,000 189,268,000 187,981,000 187,458,000 184,678,000 177,796,000
Total assets $5,359,183 $5,073,105 $4,713,878 $4,270,458 $3,125,976 $2,957,232
Total shareholders' equity $2,097,107 $1,935,565 $1,625,369 $1,554,708 $1,304,454 $1,127,878
Total redeemable preferred stock
and long-term debt $1,762,597 $1,768,682 $1,853,979 $1,604,659 $1,027,803 $1,057,277
<FN>
Note: On November 1, 1993, the Company purchased substantially all of the assets of the telephone operations of GTE Corporation in
the State of Georgia ('GTE Georgia'). This acquisition was accounted for as a purchase, and accordingly, GTE Georgia's results have
been included in the Company's consolidated financial statements as of November 1, 1993.
</FN>
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Income
For the years ended December 31,
(Dollars in thousands, except per share amounts) 1996 1995 1994
<S> <C> <C> <C>
Revenues and Sales:
Service revenues $2,524,845 $2,441,826 $2,249,933
Product sales 667,573 667,899 677,743
Total revenues and sales 3,192,418 3,109,725 2,927,676
Costs and Expenses:
Cost of products sold 448,456 449,119 422,078
Operations 1,397,626 1,352,561 1,292,251
Maintenance 147,223 147,898 151,248
Depreciation and amortization 424,115 409,799 361,963
Taxes, other than income taxes 63,093 66,370 66,270
Provision to reduce carrying value of certain assets 120,280 - -
Total costs and expenses 2,600,793 2,425,747 2,293,810
Operating Income 591,625 683,978 633,866
Other income, net 2,925 2,481 (6,064)
Interest expense (130,832) (145,428) (137,120)
Gain on disposal of assets, write-down of assets and other (2,278) 30,775 (54,157)
Income before income taxes 461,440 571,806 436,525
Income taxes 169,703 217,190 164,772
Net income 291,737 354,616 271,753
Preferred dividends 1,071 1,158 1,232
Net income applicable to common shares $290,666 $353,458 $270,521
Primary Earnings per Share $1.53 $1.86 $1.43
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
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<PAGE>
Consolidated Balance Sheets
December 31,
(Dollars in thousands)
Assets 1996 1995
Current Assets:
Cash and short-term investments $13,874 $21,421
Accounts receivable (less allowance for doubtful
accounts of $21,271 and $18,439, respectively) 554,316 582,797
Materials and supplies 17,152 22,191
Inventories 85,970 89,667
Prepaid expenses 38,156 15,165
Total current assets 709,468 731,241
Investments 838,651 611,706
Excess of cost over equity in purchased entities 425,823 480,070
Property, Plant and Equipment:
Telephone 3,827,659 3,733,468
Cellular 582,707 462,397
Information services 506,905 468,648
Other 27,618 28,965
Under construction 169,439 148,349
Total property, plant and equipment 5,114,328 4,841,827
Less accumulated depreciation 2,072,789 1,869,075
Net property, plant and equipment 3,041,539 2,972,752
Other assets 343,702 277,336
Total Assets $5,359,183 $5,073,105
The accompanying notes are an integral part of these consolidated balance
sheets.
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<PAGE>
Liabilities and Shareholders' Equity 1996 1995
Current Liabilities:
Current maturities of long-term debt $ 37,798 $ 36,892
Accounts payable 240,570 213,944
Advance payments and customers' deposits 78,080 73,660
Accrued taxes 41,932 58,341
Accrued dividends 52,440 49,149
Other current liabilities 139,876 137,298
Total current liabilities 590,696 569,284
Deferred Credits:
Investment tax 12,915 21,821
Income taxes 661,972 544,435
Total deferred credits 674,887 566,256
Long-term debt 1,756,142 1,761,604
Other liabilities 233,896 233,318
Preferred stock, redeemable 6,455 7,078
Shareholders' Equity:
Preferred stock 9,198 9,241
Common stock 187,200 189,268
Additional capital 285,779 355,663
Unrealized holding gain on investments 351,867 208,681
Retained earnings 1,263,063 1,172,712
Total shareholders' equity 2,097,107 1,935,565
Total Liabilities and Shareholders' Equity $5,359,183 $5,073,105
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<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
For the years ended December 31,
(Dollars in thousands) 1996 1995 1994
<S> <C> <C> <C>
Cash Provided from Operations:
Net income $291,737 $354,616 $271,753
Adjustments to reconcile net income to net cash
provided from operations:
Depreciation and amortization 424,115 409,799 361,963
Provision to reduce carrying value of certain assets, gain
on disposal of assets, write-down of assets, and other 74,197 (19,849) 32,223
Other, net 42,532 41,366 41,355
Increase in deferred credits 47,156 65,246 32,754
Changes in operating assets and liabilities:
Accounts receivable (24,141) (71,541) (181,997)
Inventories, including materials and supplies 7,997 5,101 (27,812)
Accounts payable 28,043 (42,096) 38,154
Other current liabilities (20,781) (5,051) (13,192)
Other, net (64,673) (48,405) 21,989
Net cash provided from operations 806,182 689,186 577,190
Cash Flows from Investing Activities:
Additions to property, plant and equipment (463,701) (523,064) (596,112)
Sale of property 38,687 212,911 -
Additions to capitalized software development costs (78,319) (52,308) (53,547)
Investments sold (acquired) 17,784 (33,729) (9,464)
Other, net (63,044) (72,019) 3,920
Net cash used in investing activities (548,593) 468,209) (655,203)
Cash Flows from Financing Activities:
Dividends on preferred and common stock (198,095) (182,270) (166,349)
Reductions in long-term debt (310,258) (277,636) (147,784)
Purchase of common stock (75,604) - (10,932)
Preferred stock redemptions and purchases (704) (1,137) (438)
Long-term debt issued 316,001 218,164 404,883
Common stock issued 3,524 17,225 16,850
Net cash provided from (used in) financing activities (265,136) (225,654) 96,230
Increase (decrease) in cash and short-term investments (7,547) (4,677) 18,217
Cash and Short-term Investments:
Beginning of year 21,421 26,098 7,881
End of year $13,874 $21,421 $026,098
Supplemental Cash Flow Disclosures:
Interest paid $124,354 $141,751 $129,788
Income taxes paid $180,575 $112,690 $150,224
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Shareholders' Equity
For the years ended December 31,
(Dollars in thousands, except per share amounts) 1996 1995 1994
<S> <C> <C> <C>
Preferred Stock:
Balance at beginning of the year $9,241 $9,320 $9,405
Conversion of preferred stock (43) (79) (85)
Balance at end of the year 9,198 9,241 9,320
Common Stock:
Balance at beginning of the year 189,268 187,981 187,458
Employee plans, net 344 1,227 535
Acquisition of subsidiary - - 324
Conversion of preferred stock and debentures 28 60 71
Repurchase of stock (2,440) - (407)
Balance at end of the year 187,200 189,268 187,981
Additional Capital:
Balance at beginning of the year 355,663 339,436 333,698
Employee plans, net 3,180 15,998 7,815
Acquisition of subsidiary - - 8,176
Conversion of preferred stock and debentures 100 229 272
Repurchase of stock (73,164) - (10,525)
Balance at end of the year 285,779 355,663 339,436
Unrealized Holding Gain on Investments:
Balance at beginning of the year 208,681 84,275 121,507
Change in unrealized holding gain on investments 143,186 124,406 (37,232)
Balance at end of the year 351,867 208,681 84,275
Retained Earnings:
Balance at beginning of the year 1,172,712 1,004,357 902,640
Net income for the year 291,737 354,616 271,753
Dividends:
Common per share, $1.06 in 1996,
$.98 in 1995 and $.90 in 1994 (200,315) (185,103) (168,804)
Preferred (1,071) (1,158) (1,232)
Balance at end of the year 1,263,063 1,172,712 1,004,357
Total shareholders' equity $2,097,107 $1,935,565 $1,625,369
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
39
51
<PAGE>
Business Segments
For the years ended December 31,
(Dollars in thousands) 1996 1995 1994
Revenues and Sales:
Telephone:
Local service $429,297 $411,434 $389,784
Network access and long-distance 595,566 637,731 644,020
Miscellaneous 144,213 148,508 144,473
Total telephone 1,169,076 1,197,673 1,178,277
Cellular 475,109 398,122 287,346
Information services 959,071 926,345 861,500
Product distribution 452,380 448,119 436,643
Other operations 136,782 139,466 163,910
Total $3,192,418 $3,109,725 $2,927,676
Operating Income:
Telephone $408,382 $422,542 $400,207
Cellular 151,720 121,507 84,655
Information services 67,035 132,043 129,765
Product distribution 23,660 27,338 23,920
Other operations 11,281 7,040 15,270
Corporate expenses (70,453) (26,492) (19,951)
Total $591,625 $683,978 $633,866
Identifiable Assets:
Telephone $2,759,683 $2,782,471 $2,909,028
Cellular 793,133 694,890 573,314
Information services 783,738 745,451 632,518
Product distribution 127,830 168,578 163,628
Other operations 56,091 58,243 65,601
Corporate 838,708 623,472 369,789
Total $5,359,183 5,073,105 $4,713,878
Capital Expenditures:
Telephone $279,622 $308,468 $331,395
Cellular 94,932 121,274 107,647
Information services 83,530 77,871 124,005
Product distribution 974 2,034 6,029
Other operations and corporate 4,643 13,417 27,036
Total $463,701 $523,064 $596,112
Depreciation and Amortization Expense:
Telephone $235,543 $243,975 $229,474
Cellular 68,603 54,856 36,821
Information services 112,911 102,033 88,627
Product distribution 1,409 1,277 1,181
Other operations and corporate 5,649 7,658 5,860
Total $424,115 $409,799 $361,963
Note: A. Information services operating income for 1996 includes pretax
write-downs of $75.0 million to reduce the carrying value of
certain assets. (See Note 8.)
B. Corporate expenses for 1996 include a pretax write-down of
$45.3 million to reduce the carrying value of the Company's wire
and cable subsidiary. (See Note 8.)
C. Refer to page 47 for additional information concerning business
segments.
40
52
<PAGE>
Notes to Consolidated Financial Statements
1. Accounting Policies:
Consolidation - The consolidated financial statements include the accounts of
ALLTEL Corporation, its subsidiary companies and majority-owned partnerships
(the "Company"). Investments in 20% to 50% owned entities and all
unconsolidated partnerships are accounted for using the equity method. Other
investments are recorded in accordance with Statement of Financial Accounting
Standards No. 115 (see Note 2). All intercompany transactions, except those
with certain affiliates described below, have been eliminated in the
consolidated financial statements. Financial Statement Presentation - The
preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses and disclosure of contingent assets and liabilities.
The estimates and assumptions used in the accompanying consolidated financial
statements are based upon management's evaluation of the relevant facts and
circumstances as of the date of the financial statements. Actual results may
differ from the estimates and assumptions used in preparing the accompanying
consolidated financial statements.
Service revenues consist of local service, network access and miscellaneous
telephone operating revenues, information services' data processing, software
licensing and maintenance revenues, and cellular access and network usage
revenues. Product sales revenues consist of the product distribution and
directory publishing operations and telephone and information services'
equipment sales. Certain prior-year amounts have been reclassified to conform
with the 1996 financial statement presentation.
Transactions with Certain Affiliates - ALLTEL Supply, Inc. sells equipment
and materials to telephone subsidiaries of the Company ($119,874,000 in 1996,
$137,951,000 in 1995 and $140,410,000 in 1994) as well as to other telephone
companies and related industries. The cost of equipment and materials sold to
such subsidiaries is included, principally, in telephone plant in the
consolidated financial statements. ALLTEL Information Services, Inc. provides
the data processing services for the Company's telephone operations
($77,195,000 in 1996, $85,131,000 in 1995 and $77,427,000 in 1994) in addition
to other companies. Intercompany profit, to the extent not offset by
depreciation on the capitalized cost of equipment and materials, has not been
eliminated because prices charged by the supply and information services
subsidiaries are comparable to prices the individual telephone subsidiaries
would be required to pay other suppliers and are recovered through the
regulatory process.
Regulatory Accounting - 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"). This accounting recognizes the economic effects of
rate regulation by recording costs and a return on investment as such amounts
are recovered through rates authorized by regulatory authorities. Accordingly,
SFAS 71 requires the Company's telephone subsidiaries to depreciate telephone
plant over useful lives as approved by regulators which could be longer than
the useful lives that would otherwise be determined by management. SFAS 71 also
requires deferral of certain costs and obligations based upon approvals
received from regulators to permit recovery of such amounts in future years.
The Company's telephone subsidiaries periodically review the applicability of
SFAS 71 based on the developments in their current regulatory and competitive
environments.
53
<PAGE>
Cash and Short-term Investments - Cash and short-term investments consist
of highly liquid investments with original maturities of less than three
months. These investments are readily convertible into cash.
Inventories - Inventories are stated at the lower of cost or market
value. Cost is determined using the first-in, first-out method of valuation.
Property, Plant and Equipment - Property, plant and equipment are stated
at original cost. Depreciation is computed using the straight-line method for
financial reporting purposes. The composite depreciation rates by class of
property as a percent of average depreciable plant and equipment were:
1996 1995 1994
Telephone 6.2% 6.4% 6.3%
Cellular 12.1 12.7 12.2
Information services 16.8 15.7 16.3
Other 10.3 9.6 9.7
For the Company's telephone operations, when utility property, plant and
equipment are retired, the original cost, net of salvage, is charged against
accumulated depreciation. All other property, plant and equipment retirements
are recorded at net book value plus salvage, if any, with the corresponding
gain or loss recognized in the accompanying consolidated statements of income.
The cost of maintenance and repairs of property, plant and equipment, including
the cost of replacing minor items not affecting substantial betterments, is
charged to maintenance expense as incurred. The Company capitalized estimated
interest during periods of construction. Excess of Cost Over Equity in
Purchased Entities - Excess of cost over equity of $398,851,000 relating to
certain entities purchased subsequent to November 1970 is being amortized on a
straight-line basis for periods up to 40 years. Amortization expense amounted
to $16,805,000 in 1996, $17,890,000 in 1995 and $15,427,000 in 1994. The
carrying value of the excess cost over equity is periodically evaluated by the
Company for the existence of impairment on the basis of whether the excess of
cost over equity is fully recoverable from projected, undiscounted net cash
flows of the related business unit.
Investment Tax Credit - The investment tax credit is amortized to income
over the productive lives of the related property, plant and equipment.
Revenue Recognition - Telephone revenues are recognized when earned and
are primarily derived from usage of the Company's local exchange networks and
facilities or under revenue-sharing arrangements with other telecommunications
carriers. Information services revenues consist of data processing revenue
recognized as services are performed, software licensing revenue recognized
when delivery of the software occurs, and software maintenance revenue
recognized ratably over the maintenance period. Certain long-term contracts
are accounted for using the percentage-of-completion method. Under this method,
revenue and profit are recognized throughout the term of the contract, based
upon estimates of the total costs to be incurred and revenues to be generated
throughout the term of the contract. Changes in estimates for revenues, costs
and profits are recognized in the period in which they are determinable. In
accordance with contractual arrangements with customers, cellular access
service revenue is recognized when billed, while revenue from network usage is
recognized when the services are rendered. For all other operations, revenue
is recognized when products are delivered or services are rendered to
customers.
41
54
<PAGE>
Included in accounts receivable and other assets are unbilled receivables
related to the information services segment totaling $141,201,000 and
$127,767,000 at December 31, 1996 and 1995, respectively. Included in these
unbilled receivables are amounts totaling $46,982,000 and $39,050,000 at
December 31, 1996 and 1995, respectively, which represent costs and estimated
earnings in excess of billings related to one long-term contract accounted for
under the percentage-of-completion method.
Computer Software Development Costs - For the Company's information
services operations, research and development expenditures related to
internally developed computer software are charged to expense as incurred.
The development costs of software to be marketed are charged to expense until
technological feasibility is established. After that time, the remaining
software development costs are capitalized and recorded in other assets in the
accompanying consolidated balance sheets. As of December 31, 1996 and 1995,
capitalized software development costs, net of amortization, were $197,913,000
and $180,370,000, respectively. Amortization of the capitalized amounts is
computed on a product-by-product basis using primarily the straight-line
method over the remaining estimated economic life of the product, not exceeding
six years. Amortization expense amounted to $28,072,000 in 1996, $29,468,000
in 1995 and $19,727,000 in 1994.
The net realizable value of capitalized software development costs is
periodically evaluated by the Company. This evaluation requires considerable
judgment by management with respect to certain external factors, including,
but not limited to, anticipated future revenues generated by the software,
estimated economic life of the software and changes in software and hardware
technologies. Accordingly, it is reasonably possible that estimates of
anticipated future revenues generated by the software, the remaining economic
life of the software, or both, may be reduced significantly in the near term,
materially impacting the carrying value of capitalized software development
costs. As a result of this periodic evaluation, the Company recorded a
write-down of software in 1996. (See Note 8.) Earnings Per Share - Primary
earnings per share of common stock was determined by dividing net income
applicable to common shares by the average number of common shares outstanding,
including common stock equivalents, during each year. The numbers of shares
used in computing primary earnings per share were 190,370,000 in 1996,
190,072,000 in 1995 and 189,454,000 in 1994. Conversion of all convertible
preferred stock and convertible debentures would not have a significant
dilutive effect on earnings per share.
2. Financial Instruments and Investment Securities:
The carrying amount of cash and short-term investments approximates fair value
due to the short maturity of the instruments. The fair value of investments is
$838.7 million based on the quoted market price and the carrying value of
investments for which there is no quoted market price. The fair value of the
Company's long-term debt, after deducting current maturities, is estimated to
be $1.772 billion in 1996 and $1.857 billion in 1995 compared to a carrying
value of $1.756 billion in 1996 and $1.762 billion in 1995. The fair value
estimates are based on the overall weighted rates and maturity compared to
rates and terms currently available in the long-term financing markets. The
fair value of the Company's redeemable preferred stock is estimated to be
$16.6 million in 1996 and $16.9 million in 1995 compared to a carrying amount
of $6.5 million in 1996 and $7.1 million in 1995. The fair value estimates are
based on the conversion of the Series D convertible redeemable preferred stock
to common stock of the Company and the carrying value of the Series A
55
<PAGE>
redeemable preferred stock for which there is no quoted market price. The fair
value of all other financial instruments is estimated by management to
approximate the carrying value.
Equity securities owned by the Company have been classified as
available-for-sale and are reported at fair value, with unrealized gains and
losses reported, net of tax, in a separate component of shareholders' equity.
The Company had unrealized gains, net of tax, on its investment in WorldCom,
Inc. of $351.9 million, $208.7 million and $84.3 million at December 31, 1996,
1995 and 1994, respectively. The unrealized gains, including the related tax
impact, are non-cash items and accordingly have been excluded from the
accompanying consolidated statements of cash flows. All other unrealized gains
and losses on investments in equity securities are not material to the
Company's financial position or results of operations.
3. Debt:
Long-term debt, after deducting current maturities, was as follows at
December 31:
(Thousands)
1996 1995
First mortgage bonds and collateralized notes,
Weighted rate 8.7% in 1996 and 1995
Weighted maturity 5 years in 1996 and 6 years in 1995 $14,485 $19,797
Debentures and notes, without collateral,
Weighted rate 7.1% in 1996 and 7.6% in 1995
Weighted maturity 13 years in 1996 and 14 years in 1995 1,320,141 1,254,859
Industrial revenue bonds and collateralized notes,
Weighted rate 6.0% in 1996 and 1995
Weighted maturity 9 years in 1996 and 10 years in 1995 8,358 8,475
Revolving credit agreement,
Weighted rate 7.1% in 1996 and 6.0% in 1995
Weighted maturity 5 years in 1996 and 3 years in 1995 83,700 151,490
Rural Utilities Service notes,
Weighted rate 4.4% in 1996 and 4.2% in 1995
Weighted maturity 16 years in 1996 and 1995 66,911 66,149
Rural Telephone Bank and Federal Financing Bank notes,
Weighted rate 7.7% in 1996 and 7.8% in 1995
Weighted maturity 17 years in 1996 and 18 years in 1995 262,547 260,834
Total long-term debt $1,756,142 $1,761,604
Weighted rate 7.1% 7.3%
Weighted maturity 13 years 14 years
The Company has a $750 million revolving credit agreement which has a
termination date of October 1, 2001, with provision for annual extensions.
It is the Company's intention to continue to renew the agreement. The revolving
credit agreement provides a variety of pricing options.
42
56
<PAGE>
The indentures and agreements, as amended, provide, among other things,
for various restrictions on the payment of dividends by the Company. Retained
earnings unrestricted as to payment of dividends by the Company amounted to
$1,024.4 million at December 31, 1996. Certain properties have been pledged as
collateral on $352.3 million of obligations.
Interest expense on long-term debt amounted to $129.4 million in 1996,
$144.4 million in 1995 and $135.2 million in 1994.
Maturities and sinking fund requirements for the four years after 1997
for long-term debt outstanding, excluding the revolving credit agreement as of
December 31, 1996, were $47.1 million, $53.7 million, $45.1 million and
$49.2 million for the years 1998 through 2001, respectively.
4. Common Stock:
There are 500,000,000 shares of $1 par value common stock authorized of which
187,199,811 and 189,267,712 shares were outstanding at December 31, 1996 and
1995, respectively. At December 31, 1996, the Company had 17,617,619 common
shares reserved for issuance in connection with convertible preferred stock
(918,639) and stock options (16,698,980).
The Company has stock-based compensation plans. Under stock option plans
implemented prior to 1994 (the "Pre-1994 Plans") and the 1994 Stock Option
Plan for Employees (the "1994 Plan"), the Company may grant fixed, incentive
and non-qualified stock options to officers and other key employees. The
maximum number of shares of the Company's common stock that may be issued under
the Pre-1994 Plans and the 1994 Plan are 5,698,980 and 10,000,000,
respectively. Options granted under the Pre-1994 Plans and the 1994 Plan become
exercisable in equal increments over a five-year period beginning one year from
the date of grant. Under the 1994 Stock Option Plan for Nonemployee Directors
(the "Directors Plan"), the Company may grant fixed, non-qualified stock
options to directors for up to 1,000,000 shares of common stock. Under the
Directors Plan, directors receive a one-time grant to purchase 10,000 shares
of common stock. Directors are also granted each year, on the date of the
annual meeting of stockholders, an option to purchase a specified number of
shares of common stock (currently 2,000 shares). Options granted under the
Directors Plan become exercisable the day immediately preceding the date of
the first annual meeting of stockholders following the date of grant. For all
plans, the exercise price of the option equals the market value of the
Company's common stock on the date of grant, and the maximum term for each
option granted is 10 years.
The following is a summary of stock options outstanding, granted,
exercised and forfeited under the Company's stock-based compensation plans:
<TABLE>
<CAPTION>
Weighted
Average Price
Shares Per Share
1996 1995 1994 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period 5,206,509 6,811,202 6,945,928 $22.45 $20.32 $19.06
Granted 855,000 126,000 650,500 31.37 26.15 26.41
Exercised (419,729) (1,472,983) (553,194) 14.74 12.45 11.59
Forfeited (125,612) (257,710) (232,032) 27.68 25.05 21.35
Outstanding at end of period 5,516,168 5,206,509 6,811,202 $24.30 $22.45 $20.32
Exercisable at end of period 3,385,268 3,001,109 3,178,800 $21.82 $19.84 $15.44
Weighted average fair value
of stock options granted
during the year $5.95 $5.49
Reserved for future options 11,182,812 11,912,812 11,784,812
</TABLE>
57
<PAGE>
For stock options granted subsequent to January 1, 1995, the fair value of
each option was estimated on the grant date using the Black-Scholes
option-pricing model and the following assumptions: dividend yield of 3.3% in
1996 and 3.7% in 1995, expected volatility of 19.6% in 1996 and 21% in 1995,
and expected option life of 5 years in 1996 and 1995. For options granted under
the Directors Plan, the risk-free interest rates were 6% and 6.7% for 1996 and
1995, respectively. For options granted under the 1994 Plan, the risk-free
interest rates were 5.4% and 6.4% for 1996 and 1995, respectively. There were
no options granted under the Pre-1994 Plans in either 1996 or 1995.
The following is a summary of stock options outstanding as of
December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Weighted Weighted Weighted
Average Average Average
Range of Options Remaining Exercise Options Exercise
Exercise Prices Outstanding Contractual Life Per Share Exercisable Per Share
<C> <C> <C> <C> <C> <C>
$11.20-$16.12 894,364 3.0 years $12.71 894,364 $12.71
$20.00-$25.38 1,156,104 5.2 years $20.18 925,304 $20.22
$26.12-$32.50 3,465,700 7.5 years $28.67 1,565,600 $27.96
5,516,168 6.3 years $24.30 3,385,268 $21.82
</TABLE>
The Company applies the provisions of Accounting Principles Board Opinion
No. 25 and related Interpretations in accounting for its stock-based
compensation plans. Accordingly, no compensation cost has been recognized by
the Company in the accompanying consolidated statements of income for any of
the fixed stock options granted in 1995 and 1996. Had compensation cost for
options granted been determined on the basis of the fair value of the awards
at the date of grant, consistent with the methodology prescribed by Statement
of Financial Accounting Standards No. 123, the Company's net income and
earnings per share would have been reduced to the following pro forma amounts
for the years ended December 31:
(Dollars in thousands,
except per share amounts) 1996 1995
Net income:
As reported $291,737 $354,616
Pro forma $291,012 $354,502
Primary earnings per share:
As reported $1.53 $1.86
Pro forma $1.52 $1.86
The above pro forma amounts reflect only the effect of stock options
granted subsequent to January 1, 1995. Accordingly, the pro forma amounts may
not be representative of the future effects on reported net income and primary
earnings per share that will result from the future granting of stock options,
since the pro forma compensation expense is allocated over the periods in
which options become exercisable and new option awards are granted each year.
43
58
<PAGE>
5. Preferred Stock:
Cumulative preferred stock is issuable in series, and the Board of Directors
is authorized to designate the number of shares and fix the terms. There are
50,000,000 $25 par value voting shares and 50,000,000 no par value non-voting
shares authorized.
The outstanding cumulative preferred stock, which is not redeemable at the
option of the holder, was as follows at December 31:
Quarterly Amount Outstanding
Dividend (Thousands)
Per Share 1996 1995 1994
$25 par value:
Series A, 5%
Shares - 39,853 in 1996, 1995 and 1994 $.31 1/4 $ 996 $ 996 $ 996
Series C, 5%
Shares - 5,000 in 1996, 1995 and 1994 .31 1/4 125 125 125
Series E, 6%
Shares - 32,000 in 1996, 1995 and 1994 .37 1/2 800 800 800
Series F, 5 1/2%
Shares - 245,955 in 1996, 1995 and 1994 .34 3/8 6,149 6,149 6,149
Series H, 6%
Shares - 12,184 in 1996, 1995 and 1994 .37 1/2 305 305 305
Series I, 5 1/2%
Shares - 4,000 in 1996, 1995 and 1994 .34 3/8 100 100 100
Series J, 6%
Shares - 1,800 in 1996, 1995 and 1994 .37 1/2 45 45 45
No par value:
Series C, $2.06 Convertible
Shares - 27,137 in 1996, 28,855 in 1995
and 31,991 in 1994 .51 1/2 678 721 800
$9,198 $9,241 $9,320
The $25 par value preferred stock may be redeemed at the option of the
Company at par value. The no par value Series C preferred shares are
convertible at any time prior to redemption into 5.963 shares of the Company's
common stock. The rate of conversion is subject to adjustment under certain
conditions.
The outstanding cumulative preferred stock, which is redeemable at the
option of the holder, was as follows at December 31:
Quarterly Amount Outstanding
Dividend (Thousands)
Per Share 1996 1995 1994
No par value:
Series A, 7 3/4%
Shares - 44,800 in 1996, 50,200
in 1995 and 55,600 in 1994 $1.93 3/4 $4,480 $5,020 $5,560
Series D, $2.25 Convertible
Shares - 70,535 in 1996, 73,500
in 1995 and 81,046 in 1994 .56 1/4 1,975 2,058 2,269
$6,455 $7,078 $7,829
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<PAGE>
The Company's Series A preferred stock is redeemed through required annual
sinking fund payments. The sinking fund requirements in each of the five years
ending December 31, 1997 through 2001 amount to $540,000.
In addition to redemption at the option of the holder and through required
sinking fund payments at the stated value per share, the Company may at its
option, under certain conditions, redeem outstanding cumulative preferred stock
at varying premiums above par or stated value.
The Company's Series D stock is convertible at any time prior to redemption
into 5.486 shares of the Company's common stock. The rate of conversion is
subject to adjustment under certain conditions. During 1996, $83,000 of Series
D stock was converted. The stock may be redeemed at the option of the Company
or the holder at the $28 per share stated value.
6. Employee Benefit Plans:
The Company has a trusteed, non-contributory, defined benefit pension plan
which provides retirement benefits for eligible employees of the Company.
Pension benefits are based on an employee's years of service and compensation.
The Company's funding policy for the defined benefit contributions is to
satisfy the funding requirements of the Employees' Retirement Income Security
Act of 1974 ("ERISA").
Certain key officers have unfunded executive compensation agreements that
provide retirement benefits in lieu of payments under the Company's pension
plan.
Pension expense, including provision for executive compensation agreements,
totaled $577,000 in 1996, $5,662,000 in 1995 and $2,225,000 in 1994.
Pension expense includes the following components:
(Thousands)
1996 1995 1994
Benefits earned during the year $12,589 $14,966 $13,386
Interest cost on projected
benefit obligation 23,597 22,301 21,410
Actual return on plan assets (40,660) (61,720) 13,092
Net amortization and deferral 5,051 30,115 (45,663)
Pension expense $577 $5,662 $2,225
The following table presents the funded status of the plan at
December 31:
(Thousands)
1996 1995
Actuarial present value of accumulated benefit
obligation, including vested benefits
of $257,236 in 1996 and $262,972 in 1995 $266,348 $272,277
Actuarial present value of projected
benefit obligation 313,878 323,381
Plan assets at fair value 394,533 369,091
Plan assets in excess of projected benefit
obligation 80,655 45,710
Unrecognized net gain (44,689) (10,534)
Remaining unrecognized prior service cost (4,315) (5,432)
Unrecognized transition asset being
amortized over 16 years (8,283) (9,466)
Prepaid pension expense $23,368 $20,278
44
60
<PAGE>
Actuarial assumptions used to calculate the projected benefit obligations
were 7.75% for the settlement rate in 1996 and 7.25% in 1995, and 5% for future
compensation level increases in 1996 and 1995. The investment earnings rate
was 9% in 1996 and 1995. The changes in the actuarial present value of the
accumulated benefit obligation and the projected benefit obligation for 1996
primarily resulted from the increase in the settlement rate assumption. Assets
of the plan consist primarily of listed stocks, including common stock of the
Company amounting to $19,191,000 and $17,437,000 at December 31, 1996 and 1995,
respectively, and corporate and government debt.
The Company has a non-contributory defined contribution plan in the form
of profit sharing arrangements for eligible employees, except bargaining unit
employees. The amount of profit sharing contributions to the plan is determined
annually by the Company's Board of Directors. Profit sharing expense amounted
to $20,426,000 in 1996, $28,672,000 in 1995 and $26,351,000 in 1994.
The Company also sponsors an employee savings plan under section 401(k) of
the Internal Revenue Code. The plan covers substantially all full-time
employees, except bargaining unit employees. Employees may elect to contribute
to the plan a portion of their eligible pretax compensation up to certain
limits as specified by the plan. The Company also makes annual contributions
to the plan. Amounts charged to income and contributed by the Company to the
plan amounted to $9,425,000 in 1996, $3,367,000 in 1995 and $7,158,000 in 1994.
7. Postretirement Benefits Other Than Pensions:
The Company provides postretirement healthcare and life insurance benefits for
eligible employees. The healthcare benefit is based on comprehensive hospital,
medical and surgical benefit provisions, while the life insurance is based on
annual earnings at the time of retirement. The employees share in the cost of
these benefits. The Company is not currently funding these plans.
The postretirement expense includes the following components:
(Thousands)
1996 1995 1994
Benefits earned $102 $112 $426
Amortization of transition obligation 976 976 976
Other amortization and deferral 40 (918) (3)
Interest cost on accumulated
postretirement benefit obligation 2,719 2,454 2,722
Postretirement expense $3,837 $2,624 $4,121
The following table presents the plan status at December 31:
(Thousands)
1996 1995
Accumulated postretirement benefit obligation:
Retirees $34,337 $37,392
Fully eligible active plan participants 709 1,088
Other active plan participants 1,119 2,413
Total accumulated postretirement benefit obligation 36,165 40,893
Unrecognized net gain 5,162 3,168
Unrecognized prior service cost (712) (2,152)
Unrecognized transition obligation being amortized
over 20 years (15,614) (16,590)
Accrued postretirement benefit obligation $25,001 $25,319
61
<PAGE>
Actuarial assumptions used to calculate the accumulated postretirement
benefit obligation were 7.75% for the weighted average discount rate in 1996
and 7.25% for 1995, and 10% for the healthcare cost trend rate in 1996 and 11%
for 1995, decreasing on a graduated basis to an ultimate rate of 6% in the year
2000. A one percentage point change in the assumed healthcare cost trend rate
for each future year would change the postretirement benefit cost by
approximately $152,000 for the year ended December 31, 1996, and the
accumulated postretirement benefit obligation as of December 31, 1996, by
approximately $1.9 million.
During 1996, the Company made certain changes to its postretirement
healthcare benefits for non-bargaining unit employees retiring on or after
January 1, 1998. The reductions for 1996 in the total accumulated
postretirement obligation and the unrecognized prior service cost reflect the
impact of these plan changes.
8. Provision to Reduce Carrying Value of Certain Assets:
During the third quarter of 1996, the Company incurred non-cash, pretax charges
of $120.3 million to write down the carrying value of certain assets. The
Company recorded a pretax write-down of $45.3 million in the carrying value of
goodwill related to its product distribution segment's wire and cable
subsidiary, HWC Distribution Corp., ("HWC"). This write-down resulted from the
Company's plan to dispose of this non-strategic operation. The Company expects
to complete the sale of HWC in 1997. In addition, the information services
segment recorded a pretax write-down of $53.0 million, primarily consisting of
an adjustment to the carrying value of certain capitalized software development
costs. The write-down of software resulted from performing a net realizability
evaluation of software-related products that have been impacted by changes in
software and hardware technologies. Finally, due to current and projected
future operating losses sustained by its community banking operations,
information services also recorded a pretax write-down of $22.0 million to
adjust the carrying value of these operations to their estimated fair value
based upon projections of future cash flows. The Company expects to dispose of
or discontinue these operations by the end of 1997. The net income impact of
these write-downs resulted in a decrease in net income of $72.7 million or
$.38 per share for the year ended December 31, 1996.
Operating results of the wire and cable subsidiary included in the
Company's consolidated results of operations were as follows:
(Thousands)
1996 1995 1994
Revenues and sales $156,536 $158,605 $158,958
Operating income $7,919 $11,039 $9,766
45
62
<PAGE>
9. Gain on Disposal of Assets, Write-down of Assets and Other:
During the first quarter of 1996, the Company recorded a pretax gain of
$15.3 million from the sale of telephone properties in Nevada to Citizens
Utilities Company ("Citizens"). The Company also incurred $15.8 million of
termination fees related to the early retirement of $200 million of long-term
debt, and the Company realized a pretax loss of $1.8 million related to the
withdrawal of its investment in GO Communications Corporation. The net income
impact from these transactions resulted in a decrease of $.01 per share for the
year ended December 31, 1996.
During the fourth quarter of 1995, the Company recorded a pretax gain of
$18.9 million on the sale of its telephone properties in Arizona, California,
New Mexico, Tennessee and Utah to Citizens, and the Company incurred
$14.0 million of termination fees related to the early retirement of
$200 million of long-term debt. During the second quarter of 1995, the Company
recorded a pretax 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
pretax write-down of $5.0 million to reflect the net realizable value of its
information services segment's check processing operations. The net income
impact from these transactions resulted in an increase of $.10 in earnings per
share for the year ended December 31, 1995.
In 1994, the Company recorded a write-down of $54.2 million to reflect
the estimated net realizable value of its information services segment's
community banking and check processing operations. This write-down resulted in
a decrease of $.17 in earnings per share in 1994.
10. Income Taxes:
Income tax expense was as follows:
(Thousands)
1996 1995 1994
Federal $141,320 $181,947 $137,277
State and other 28,383 35,243 27,495
$169,703 $217,190 $164,772
The federal income tax expense consists of the following:
(Thousands)
1996 1995 1994
Currently payable $141,035 $128,589 $104,359
Deferred 9,218 62,614 40,416
Investment tax credit amortized (8,933) (9,256) (7,498)
$141,320 $181,947 $137,277
63
<PAGE>
Deferred income tax expense results principally from temporary differences
between depreciation expense for income tax purposes and depreciation expense
recorded in the financial statements. Deferred tax balances are adjusted to
reflect tax rates, based on currently enacted tax laws, that will be in effect
in the years in which the temporary differences are expected to reverse. For
the Company's regulated operations, the adjustment in deferred tax balances
for the change in tax rates is reflected as a regulatory asset or liability.
These regulatory assets and liabilities are amortized over the lives of the
related depreciable asset or liability concurrent with recovery in rates.
Differences between the federal income tax statutory rates and effective
income tax rates, which include both federal and state income taxes, were as
follows:
1996 1995 1994
Statutory income tax rates 35.0% 35.0% 35.0%
Increase (decrease):
Investment tax credit (1.9) (1.6) (1.7)
State income taxes, net of
federal benefit 4.0 4.0 4.1
Other items (0.3) 0.6 0.4
Effective income tax rates 36.8% 38.0% 37.8%
The significant components of the Company's net deferred income tax
liability were as follows at December 31:
(Thousands)
1996 1995
Property, plant and equipment $400,725 $346,482
Capitalized computer software 71,609 49,365
Unrealized holding gain on investments 231,982 150,161
Other, net (42,344) (1,573)
Total $661,972 $544,435
At December 31, 1996 and 1995, total deferred tax assets were
$201.1 million and $211.8 million, respectively, and total deferred tax
liabilities were $863.1 million and $756.2 million, respectively.
11. Other Income, Net:
The components of other income, net were as follows:
(Thousands)
1996 1995 1994
Equity earnings in unconsolidated partnerships $31,353 $20,282 $11,662
Minority interest in consolidated partnerships (37,538) (28,997) (20,038)
Capitalized interest during construction 5,160 6,221 3,361
Interest and dividend income 500 1,052 919
Other non-operating income (expense) 3,450 3,923 (1,968)
$2,925 $2,481 $(6,064)
46
64
<PAGE>
12. Business Segments:
The Company's telephone operating subsidiaries provide primary local telephone
service and network access in 14 states. Cellular operations provide wireless
communications services in a number of major U.S. markets - primarily in the
Sun Belt. Information services provides information processing management,
outsourcing services and application software, primarily to financial and
telecommunications clients. The principal markets for information services'
products and services are commercial banks and financial institutions and local
telephone and wireless companies in the United States and major international
markets. Product distribution sells communications and data products to
affiliated and non-affiliated telephone companies and related industries in
the United States and specialty electrical and electronic wire and cable to
other domestic distributors and wholesalers. Other operations primarily include
directory publishing and wide-area paging services. Corporate identifiable
assets consist primarily of cash, investments and headquarters facilities and
equipment. Corporate items represent general corporate expenses and assets not
allocated to segments. (Refer to page 40 for a schedule of business segment
information.)
13. Quarterly Financial Information - (Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands, except per share amounts) 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total 4th 3rd 2nd 1st Total 4th 3rd 2nd 1st
Revenues and sales $3,192,418 $806,301 $807,398 $804,453 $774,266 $3,109,725 $773,855 $785,779 $786,476 $763,615
Operating income $591,625 $183,735 $55,835 $180,890 $171,165 $683,978 $177,302 $175,355 $169,783 $161,538
Net income $291,737 $96,932 $18,824 $91,908 $84,073 $354,616 $92,577 $85,312 $98,104 $78,623
Preferred dividends 1,071 258 265 274 274 1,158 275 287 279 317
Net income applicable to
common shares $290,666 $96,674 $18,559 $91,634 $83,799 $353,458 $92,302 $85,025 $97,825 $78,306
Primary earnings per share $1.53 $.51 $.10 $.48 $.44 $1.86 $.48 $.45 $.52 $.41
Excluding provision to reduce carrying
value of certain assets, gain on
disposal of assets, write-down
of assets, and other:
Operating income $711,905 $183,735 $176,115 $180,890 $171,165 $683,978 $177,302 $175,355 $169,783 $161,538
Net income $365,934 $96,932 $91,540 $91,908 $85,554 $334,767 $89,335 $85,312 $81,497 $78,623
Primary earnings per share $1.92 $.51 $.48 $.48 $.45 $1.76 $.47 $.45 $.43 $.41
Dividends per common share $1.06 $.28 $.26 $.26 $.26 $.98 $.26 $.24 $.24 $.24
<FN>
Note: A. Third quarter 1996 operating income includes pretax write-downs of $45.3 million and $22.0 million in the carrying value
of the Company's electronic wire and cable operations and the information services segment's community banking
operations, respectively. In addition, the information services segment recorded a pretax write-down of $53.0 million to
reflect the net realizable value of certain capitalized software development costs. These transactions decreased net
income by $72.7 million or $.38 per share. (See Note 8.)
B. First quarter 1996 net income includes a pretax gain of $15.3 million from the sale of certain telephone properties,
$15.8 million of termination fees related to the early retirement of long-term debt and a pretax loss of $1.8 million
from the withdrawal of an investment. These transactions decreased net income by $1.5 million or $.01 per share.
(See Note 9.)
C. Fourth quarter 1995 net income includes a pretax gain of $18.9 million from the sale of certain telephone properties
and $14.0 million of termination fees related to the early retirement of long-term debt. These transactions increased
net income by $3.2 million or $.01 per share. (See Note 9.)
D. Second quarter 1995 net income includes a pretax gain of $30.9 million from the sale of certain telephone properties
and an additional pretax write-down of $5.0 million on the Company's check processing operations. These transactions
increased net income by $16.6 million or $.09 per share. (See Note 9.)
E. All adjustments necessary for a fair presentation of results for each period have been included.
</FN>
</TABLE>
47
65
<PAGE>
TELEPHONE WIRELESS NETWORKS INFORMATION SERVICES
SOFTWARE INTERNET COMMUNICATIONS AND DATA EQUIPMENT
Investor Information
Corporate Headquarters Annual Meeting
ALLTEL Corporation The Annual Meeting of ALLTEL Corporation
One Allied Drive stockholders will be held at 11 a.m.
Little Rock, Arkansas 72202 (CDT) on Thursday, April 24, 1997, at
501.661.8000 Arkansas' Excelsior Hotel, Ballroom
www.alltel.com Level, Three Statehouse Plaza,
Little Rock, Arkansas.
Transfer Agent, Registrar and Investor Relations
Dividend Disbursing Agent Information requests from investors,
First Union National Bank of security analysts and other members of
North Carolina Shareholder the investment community should be
Services Division addressed to Shawne Leach, Vice
230 South Tryon Street President- Investor Relations.
Charlotte, North Carolina One Allied Drive, Little Rock, Arkansas
28288-1153 72202.
501.661.8999 fax 501.661.5444
Common Stock Price and Dividend Information
Ticker Symbol AT
Newspaper Listings ALLTEL, ALTEL
Market Price
Dividend
Year Qtr. High Low Close Declared
1996 4th 32 3/4 27 1/2 31 3/8 .275
3rd 30 7/8 26 5/8 27 7/8 .26
2nd 33 1/8 29 1/4 30 3/4 .26
1st 35 5/8 28 1/4 30 7/8 .26
1995 4th 31 1/8 27 3/8 29 1/2 .26
3rd 30 1/4 25 1/8 29 7/8 .24
2nd 29 3/4 23 1/4 25 3/8 .24
1st 31 27 3/4 28 3/4 .24
The common stock is listed and traded on the New York and Pacific Stock
exchanges. The above table reflects the range of high, low and closing prices
as reported by Dow Jones & Company, Inc.
Shareholder Services Annual Report and Form 10-K Requests
General questions about accounts, The 1996 Annual Report and the Form 10-K
stock certificates or dividends Annual Report filed with the Securities
should be directed to the and Exchange Commission are available
Shareholder Services Department, without charge to stockholders upon
50 Executive Parkway, Hudson, request to the Shareholder Services
Ohio 44236. Department, 50 Executive Parkway,
216.650.7108 Hudson, Ohio 44236.
216.650.7108
Dividend Reinvestment and Stock Purchase Plan
ALLTEL offers a Dividend Reinvestment and Stock Purchase Plan for registered
common stockholders. In addition to reinvesting dividends, the plan allows
participants to invest cash toward the purchase of ALLTEL common stock.
Additional information about dividend reinvestment may be obtained from the
Shareholder Services Department.
Electronic Dividend Deposit
ALLTEL offers Electronic Dividend Deposit to registered common stockholders.
Electronic deposit allows dividend payments to be automatically deposited into
a checking or savings account and eliminates the inconvenience of delayed or
lost dividend checks. More information about Electronic Dividend Deposit may
be obtained from the Shareholder Services Department
49
66
AMENDMENT
TO
ALLTEL CORPORATION
DIRECTORS' RETIREMENT PLAN
WHEREAS, the Board of Directors of ALLTEL Corporation
adopted the amended ALLTEL Corporation Directors' Retirement Plan, effective
as of January 1, 1994 (the "Plan"); and
WHEREAS, the Board of Directors desires to terminate the
Plan and further to amend the Plan;
NOW THEREFORE, the Plan is hereby amended, effective as of
January 30, 1997, by adding a new section at the end thereof to provide as
follows:
Termination of Plan
Effective as of January 30, 1997 (the "Termination Date"), the Plan shall
be terminated. The provisions of this section shall apply notwithstanding
any other provision of the Plan to the contrary. On and after the
Termination Date, no director shall become eligible to participate in the
Plan.
The termination of the Plan shall not affect any retirement benefit
payable to directors who "retired" (as defined in the Plan) prior to the
Termination Date.
A person who is both a director and a corporate officer on the Termination
Date shall not be eligible to receive any benefit under the Plan
regardless of whether such person is or is not a corporate officer upon
retirement as a director.
A person who is a director but is not a corporate officer on the
Termination Date and who subsequently "retires" (as defined in the Plan)
and is not a corporate officer at the time of retirement will receive, in
lieu of the benefit, if any, for which he would have been eligible if he
had "retired" (as defined in the Plan) on the day immediately preceding
the Termination Date, the applicable percentage of the retirement benefit
specified below:
67
<PAGE>
Percent of Base Annual Director
Years of Service Fee in Effect on the Termination Date
Less than 1 0%
1 but less than 2 10%
2 but less than 3 20%
3 but less than 4 30%
4 but less than 5 40%
5 but less than 6 50%
6 but less than 7 55%
7 but less than 8 60%
8 but less than 9 65%
9 but less than 10 70%
10 but less than 11 75%
11 but less than 12 80%
12 but less than 13 85%
13 but less than 14 90%
14 but less than 15 95%
15 or more 100%
For purposes of the preceding schedule, Years of Service shall have the
meaning defined in the Plan, except that, only eligible service occurring
prior to the Termination Date shall be taken into account and the portion,
if any, of a director's period of service (or aggregated periods of
service) that constitutes Years of Service (as defined in the Plan) as of
the Termination Date that would otherwise be disregarded because it is
not a full Year of Service shall be counted as a full Year of Service.
In no event, however, shall a director's retirement benefit calculated
under the preceding schedule be less than the retirement benefit for which
the director would have been eligible had he "retired" (as defined in the
Plan) on the day immediately preceding the date the action adopting the
provisions of this section is taken by the Board of Directors.
Notwithstanding the foregoing provisions of this section, a person who is
a director on the Termination Date and who is not a corporate officer on
the Termination Date may elect, in lieu of all other rights and benefits
under the Plan, either of the following:
1. To have the amount set forth with respect to the director on
Schedule A attached to and hereby made a part hereof credited to the
director's Special Deferred Compensation Account (as defined in the
ALLTEL Corporation Deferred Compensation Plan for Directors, as
amended) under the ALLTEL Corporation Deferred Compensation Plan for
Directors, as amended; or
2
68
<PAGE>
2. To receive a grant of the number of Options (as defined in the~ALLTEL
Corporation 1994 Stock Option Plan for Nonemployee Directors, as
amended) set forth with respect to the director on Schedule A hereto
under the ALLTEL Corporation 1994 Stock Option Plan for Nonemployee
Directors, as amended.
Such election may be made only during the period beginning
January 31, 1997, and ending at 5:00 p.m. Central standard time on
February 13, 1997, in the form of Exhibit A attached to and made a part
hereof and in accordance with any procedures prescribed by the Chairman
of the Board of Directors.
3
69
<PAGE>
SCHEDULE A
TO
ALLTEL CORPORATION DIRECTORS' RETIREMENT PLAN
Number of
Name Credit Options
Ben W. Agee $146,199 26,777
Michael D. Andreas $ 7,487 1,371
John R. Belk $ 3,625 664
Lawrence L. Gellerstedt $ 6,689 1,225
W.W. Johnson $ 87,725 16,067
John P. McConnell $ 7,850 1,438
Emon A. Mahony, Jr. $ 65,186 11,939
Josie C. Natori $ 8,397 1,538
Ronald Townsend $ 31,794 5,823
William H. Zimmer, Jr. $134,522 24,638
4
70
<PAGE>
Exhibit A
ALLTEL CORPORATION DIRECTORS' RETIREMENT PLAN
ELECTION FORM
I, , hereby irrevocably elect, in lieu of all
benefits that might otherwise become payable to me under the ALLTEL Corporation
Directors' Retirement Plan, as amended (the "Plan") one of the following:
_____ 1. I elect to have $__________ (which is the amount set forth on
Schedule A to the Plan with respect to me) credited to a Special
Deferred Compensation Account established for me under the ALLTEL
Corporation Deferred Compensation Plan for Directors, as amended.
I understand that my Special Deferred Compensation Account will be
subject to all applicable provisions of the ALLTEL Corporation
Deferred Compensation Plan for Directors, as amended.
I understand that for my election of this alternative to be
effective, I must also complete the Deferred Compensation Plan for
Directors Election form.
_____ 2. I elect to receive a grant of _____ options (which is the number of
options set forth on Schedule A to the Plan with respect to me)
under the ALLTEL Corporation 1994 Stock Option Plan for Nonemployee
Directors, as amended.
I understand that the grant of options to me will be subject to all
applicable provisions of the ALLTEL Corporation 1994 Stock Option
Plan for Nonemployee Directors, as amended.
I understand that for my election above to be effective, it must be
properly completed and delivered to ALLTEL Corporation to the attention of
Mr. John Comparin prior to 5:00 p.m. Central standard time on
February 13, 1997.
5
71
<PAGE>
I understand that if I do not make an effective election as described
above, if I meet the Plan's eligibility requirements, I will receive a
retirement benefit under the Plan based on the Years of Service which I am
credited under the Plan as of January 30, 1997 and the base director's fees in
effect on January 30, 1997.
I acknowledge that my election above is irrevocable and that once
made, I will not have any rights or benefits under the Plan.
I acknowledge that I have been advised to consult with my own tax and
estate planning advisors before making the foregoing election in order to
determine the tax effect of my election.
__________________________________
(Signature)
__________________________________
(Print or type name)
__________________________________
(Date)
The foregoing Election Form
is hereby acknowledged.
ALLTEL CORPORATION
By ___________________________
Title: ______________________
Date: ______________________
6
72
AMENDMENT
TO
ALLTEL CORPORATION
DEFERRED COMPENSATION PLAN FOR DIRECTORS
WHEREAS, ALLTEL Corporation (the "Company") amended and
restated the ALLTEL Corporation Deferred Compensation Plan for Directors,
effective October 1, 1993 (the "Plan"); and
WHEREAS, the Company desires further to amend the Plan;
NOW THEREFORE, the Plan is hereby amended, effective as of
February 13, 1997, by adding a new Article VI immediately following Article V
thereof to provide as follows:
ARTICLE VI
PROVISIONS REGARDING
SPECIAL DEFERRED COMPENSATION ACCOUNTS
1. Definitions. For purposes of the Plan, the following
additional definitions shall apply:
(a) An "Electing Participant" shall mean a Director who has
made an effective election under the ALLTEL Corporation Directors'
Retirement Plan, as amended, to have an amount credited to a Special
Deferred Compensation Account under the Plan in lieu of any benefits
under the ALLTEL Corporation Directors' Retirement Plan, as amended,
and who has made the election required by Section 4 of this
Article VI. For relevant purposes of the Plan other than this
Article VI, an Electing Participant shall be deemed to be a
Participant, without regard to whether or not he has elected to
defer all or any portion of his Fees for a Year.
(b) A "Special Deferred Compensation Account" shall mean the
bookkeeping account established for an Electing Participant on which
73
<PAGE>
shall be recorded the amount set forth with respect to the Electing
Participant on Schedule A to the ALLTEL Corporation Directors'
Retirement Plan, as amended, and any adjustments thereto in
accordance with the Plan.
2. General. The provisions of this Article VI shall apply
notwithstanding any other provisions of the Plan to the contrary.
3. Special Deferred Compensation Account. The amount set
forth with respect to an Electing Participant on Schedule A to the
ALLTEL Corporation Directors' Retirement Plan, as amended, shall be
credited to the Electing Participant's Special Deferred Compensation
Account as of February 14, 1997. An Electing Participant's Special
Deferred Compensation Account shall be credited with earnings, if
any, in the manner provided in Section 4 of Article II, but "the
amount set forth with respect to the Electing Participant on
Schedule A to the ALLTEL Corporation Directors' Retirement Plan, as
amended," shall be substituted for "Fees" and [1997] shall be
substituted as the Deferral Year. For all other relevant purposes of
the Plan, each reference in the Plan to a "Deferred Compensation
Account" shall be deemed to include a reference to a "Special
Deferred Compensation Account."
4. Election. An Electing Participant shall make an election
prior to 5:00 p.m. Central standard time on February 13, 1997 with
respect to his Special Deferred Compensation Account in the form of
Exhibit A attached to and hereby made a part hereof, which form shall
be an Election Agreement for relevant purposes of the Plan with
respect to a Special Deferred Compensation Account.
2
74
<PAGE>
Exhibit A
DEFERRED COMPENSATION PLAN FOR DIRECTORS ELECTION
I, , hereby make the following elections
with respect to the amount to be credited to a Special Deferred Compensation
Account under the ALLTEL Corporation Deferred Compensation Plan for Directors,
as amended, (the "Plan").
I elect to receive payment of my Special Deferred
Compensation Account as follows (check one):
_____ 1. MARCH 1, NEXT FOLLOWING THE END OF THE YEAR IN WHICH I CEASE TO BE
A DIRECTOR. (I understand that if I make this election, and for
example, cease to be a Director on June 1 of a Year, my Special
Deferred Compensation Account will be credited with earnings
thereon, at the rate determined in accordance with Article II,
Section 5, of the Plan, and a payment will be made to me on
March 1, of the following Year.)
_____ 2. ONE MONTH AFTER THE DATE I CEASE TO BE A DIRECTOR, BUT NOT EARLIER
THAN MARCH 1 OF THE YEAR IN WHICH I CEASE TO BE A DIRECTOR. (I
understand that if I make this election and, for example, cease to
be a Director on June 1 of a Year, my Special Deferred Compensation
Account will be credited with earnings thereon, at the rate
determined in accordance with Article II, Section 5, of the Plan,
and a payment will be made to me on July 1, of the same Year. On
the other hand, if I cease to be a Director on December 31, of a
Year, my Special Deferred Compensation Account will be credited
with earnings in the manner described above, and a payment will be
made to me on the following March 1.)
_____ 3. ONE YEAR AFTER THE DATE I CEASE TO BE A DIRECTOR. (I understand
that if I make this election, and for example, cease to be a
Director on June 1 of a Year, my Special Deferred Compensation
Account will be credited with earnings thereon, at the rate
determined in accordance with Article II, Section 5 of the Plan and
a payment will be made to me on June 1 of the following Year.)
_____ 4. THE LATER OF THE DATE ONE MONTH AFTER I CEASE TO BE A DIRECTOR OR
THE DATE OF MY 70TH BIRTHDAY. If my 70th birthday is the operative
date, a payment will be made within one month thereafter, but in
3
75
<PAGE>
neither case will a payment be made earlier than March 1 of the
Year in which I cease to be a Director or attain age 70. (I
understand that if I make this election, and, for example, my 70th
birthday is January 15, 20X6, and I am then still a Director, my
Special Deferred Compensation Account will be credited with
earnings thereon, at the rate determined in accordance with
Article II, Section 5 of the Plan, and a payment will be made one
month later, or by March 1 of the year I cease to be a Director
(the delay being necessary to prepare year-end audited financial
statements). If I am not a Director on January 15, 20X6, my
Deferred Compensation Account for this deferral will be credited
with earnings in the manner described above, and a payment will be
made to me on March 1, 20X6.)
Please make payment of all amounts reflected on my Special Deferred
Compensation Account in accordance with Section 4 of Article II and Section 4
of Article VI of the Plan as follows (check one):
_____ 1. Pay in a lump sum on the date checked above.
_____ 2. Pay in __________ equal annual installments, beginning on the date
elected above. The number of annual installments cannot exceed 15.
I acknowledge that I have reviewed the Plan and understand that my
participation will be subject to the terms and conditions contained in the
Plan.
I acknowledge that I have been advised to consult with my own tax and
estate planning advisors before making the foregoing elections in order to
determine the tax effect of my elections.
__________________________________
(Signature)
__________________________________
(Print or type name)
The foregoing Election Agreement
is acknowledged as of the date of
execution above written.
4
76
<PAGE>
ALLTEL CORPORATION
By ___________________________
Title: _____________________
5
77
FIRST AMENDMENT
TO
ALLTEL CORPORATION
1994 STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS
WHEREAS, the Board of Directors of ALLTEL Corporation ("ALLTEL")
adopted the ALLTEL Corporation 1994 Stock Option Plan for Nonemployee
Directors (the "Plan") effective January 27, 1994, and the stockholders of
ALLTEL approved the Plan at the 1994 Annual Meeting of Stockholders of ALLTEL;
and
WHEREAS, the Plan provides that it may be amended by the Board of
Directors of ALLTEL, and the Board of Directors of ALLTEL has determined that
such an amendment is advisable;
NOW, THEREFORE, the Plan hereby is amended, effective as of
January 30, 1997, as follows:
1. Section 3.1 of the Plan hereby is amended in its entirety to
read as follows:
"3.1 Administration by the Board. The Plan shall be
administered by the Board of Directors, subject to the terms and
provisions of the Plan. The Board shall have the full power,
discretion, and authority to interpret and administer the Plan in
a manner consistent with the provisions of the Plan; except that,
in no event shall the Board have the power to determine
eligibility for participation under the Plan."
2. Section 6.2 of the Plan hereby is amended in its entirety to
read as follows:
"6.2 Subsequent Grants of Options. During the period
after the date ALLTEL's 1994 Annual Meeting is concluded that the
Plan is in effect, Options shall be granted under the Plan as
follows:
(a) each Person who is a Nonemployee Director
immediately following each of ALLTEL's annual meetings of
stockholders held during calendar years after 1994 (other than a
Person who first becomes a Nonemployee Director on the date of
any such annual meeting) shall be granted an Option to purchase
2,000 Shares, effective as of the date each such annual meeting
of stockholders is concluded, and each Person who first becomes a
Nonemployee Director on any date other than the date on which
ALLTEL's 1994 Annual Meeting of Stockholders is concluded shall
78
<PAGE>
be granted an Option to purchase 10,000 Shares, effective as of
the date such Person first becomes a Nonemployee Director;
(b) each Person who is a Nonemployee Director
immediately following each of ALLTEL's annual meetings of
stockholders held during calendar years commencing in 1997 (other
than a Person who first becomes a Nonemployee Director on the
date of any such annual meeting) shall be granted an additional
Option to purchase 1,500 Shares, effective as of the date each
such annual meeting of stockholders is concluded; and
(c) each Nonemployee Director who was a participant in
the ALLTEL Corporation Directors' Retirement Plan, as amended, as
of January 30, 1997 and who elected to receive Options in
accordance with this Section 6.2(c) by submission of a Directors'
Retirement Plan Election Form in the form approved by the Board
of Directors, shall be granted the number of Options set forth
opposite the Person's name on Schedule 1 attached to the First
Amendment to this Plan, effective as of February 14, 1997."
3. Section 6.7 of the Plan hereby is amended in its entirety to
read as follows:
"6.7 Vesting of Options. Subject to the terms of the
Plan, an Option granted under Section 6.1, 6.2(a) or 6.2(b) of
the Plan and held by a Participant shall vest and become
exercisable on the earliest of:
(a) The day immediately preceding the date of the first
ALLTEL annual meeting of stockholders following the
effective date of the grant of the Option;
(b) The date of the death of the Participant;
(c) The date of the Disability of the Participant; or
(d) The date a Change of Control is deemed to have
occurred.
An Option granted under Section 6.2(c) of the Plan shall be
fully vested and exercisable on the date the grant of the Option
is effective."
4. Section 6.10 of the Plan hereby is amended in its entirety to
read as follows:
"6.10 Restrictions on Share Transferability. The Board
shall impose such restrictions on any Options and Shares acquired
upon the exercise of any Options under the Plan as it may deem
advisable, including, without limitation, restrictions under
applicable federal securities laws, the requirements of the New
York Stock Exchange, and any blue sky or state securities laws
applicable to the Options and Shares."
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5. The first sentence of Section 7.1 of the Plan hereby is
amended in its entirety to read as follows:
"Subject to the terms specified in this Section 7.1, the
Board may terminate, amend, or modify the Plan at any
time and from time to time."
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Schedule 1
Name Number of Options
Michael D. Andreas 1,371
Lawrence L. Gellerstedt, III 1,225
W.W. Johnson 16,067
Josie C. Natori 1,538
81
AMENDED AND RESTATED
AMENDMENT NO. 4
TO
ALLTEL CORPORATION THRIFT PLAN
(January~1, 1994 Restatement)
WHEREAS, ALLTEL Corporation (the "Company") maintains the ALLTEL
Corporation Thrift Plan, as amended and restated effective January 1, 1994,
and subsequently further amended, (the "Plan"); and
WHEREAS, the Company desires to supersede in their entirety the
provisions of Amendment No. 4 to ALLTEL Corporation Thrift Plan (January 1,
1994 Restatement) with the provisions of this Amended and Restated Amendment
No. 4 to ALLTEL Corporation Thrift Plan (January 1, 1994 Restatement);
NOW THEREFORE, BE IT RESOLVED, that the Company hereby amends
the Plan in the respects hereinafter set forth:
1. Effective with respect to Plan Years beginning on or after
January 1, 1996, Section 1.01 of the Plan is amended to provide as follows:
1.01 Additional Employer Matching Contribution
A discretionary Employer matching contribution made pursuant to
Section 13.03.
2. Effective with respect to Plan Years beginning on or after
January 1, 1996, the Plan is amended by adding a new Section 1.02-A
immediately following Section 1.02 to provide as follows:
1.02-A Basic Employer Matching Contribution
A discretionary Employer matching contribution made pursuant to
Section 13.02.
3. Effective with respect to Plan Years beginning on or after
January 1, 1996, the Plan is amended by adding a new Section 1.10-A
immediately following Section 1.10 to provide as follows:
1.10-A Electing Participant
Any Participant on whose behalf Salary Deferral Contributions are
currently being made to the Plan pursuant to the Participant's
election under Section 12.01.
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4. Effective as of February 15, 1995, Section 1.13 of the Plan
is amended to provide as follows:
1.13 Employer
ALLTEL Information Services, Inc., and any other member of the
Controlled Group adopting the Plan pursuant to Section 3.01 or any
corresponding predecessor provision of the Plan.
5. Effective with respect to Plan Years beginning on or after
January 1, 1996, Section 1.14 of the Plan is amended to provide as follows:
1.14 Employer Contribution
Any Employer contribution made pursuant to Article XIII.
6. Effective with respect to Plan Years beginning on or after
January 1, 1996, the Plan is amended by adding a new Section 1.14-A immediately
following Section 1.14 to provide as follows:
1.14-A Employer Qualified Nonelective Contribution
An Employer contribution made pursuant to Section 13.01.
7. Effective with respect to Plan Years beginning on or after
January 1, 1996, Section 1.19 of the Plan is amended to provide as follows:
1.19 Matched Salary Deferral Contributions
With respect to Basic Employer Matching Contributions, an eligible
Participant's Salary Deferral Contributions that are not in excess of
6% of his Compensation for the Plan Year. With respect to Additional
Employer Matching Contributions, an eligible Participant's Salary
Deferral Contributions that are (i) in excess of 3% of his
Compensation for the Plan Year and (ii) not in excess of 6% of his
Compensation for the Plan Year.
8. Effective with respect to Plan Years beginning on or after
January 1, 1996, the Plan is amended by adding a new Section 1.19-A
immediately following Section 1.19 to provide as follows:
1.19-A Matching Employer
With respect to Basic Matching Employer Contributions, ALLTEL
Information Services, Inc., each subsidiary (direct or indirect) of
ALLTEL Information Services, Inc. that is an Employer hereunder (other
than a subsidiary that has not elected to make Basic Employer Matching
Contributions to the Plan), and each other Employer that has elected
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to make Basic Employer Matching Contributions to the Plan. With
respect to Additional Employer Matching Contributions, each Employer
that (i) is a Matching Employer with respect to Basic Employer
Matching Contributions and (ii) has elected to make Additional
Employer Matching Contributions to the Plan.
9. Effective with respect to Plan Years beginning on or after
January 1, 1996, Section 1.40 of the Plan is amended to provide as follows:
1.40 Unmatched Salary Deferral Contributions
With respect to Basic Employer Matching Contributions, all Salary
Deferral Contributions that are not Matched Salary Contributions with
respect to Basic Employer Contributions. With respect to Additional
Employer Matching Contributions, all Salary Deferral Contributions
that are not Matched Salary Contributions with respect to Additional
Employer Contributions.
10. Effective with respect to Plan Years beginning on or after
January 1, 1996, the Plan is amended by adding a new Section 1.42 immediately
following Section 1.41 to provide as follows:
1.42 Year of Eligibility Service
A computation period during which an Employee is credited with at
least 1,000 Hours of Service for purposes of determining his
eligibility to participate in the Plan with respect to Employer
Qualified Nonelective Contributions. For purposes of this
Section 1.42, a computation period means (i) the 12-consecutive-month
period beginning on the first date an Employee completes an Hour of
Service, and (ii) each Plan Year beginning after such date. The
determination of Years of Eligibility Service for certain Employees
may be modified by Section 9.04.
1.43 Year of Participation Service
A Plan Year beginning on or after January 1, 1996, during which an
Employee completes at least 1,000 Hours of Service.
11. Effective with respect to Plan Years beginning on or after
January 1, 1996, paragraph (c) of Section 5.02 of the Plan is amended by
adding immediately following the term "Salary Deferral Contributions
Sub-Account" the following:
or any portion of the balance of his Employer Contributions
Sub-Account attributable to Employer Qualified Nonelective
Contributions
12. Effective with respect to Plan Years beginning on or after
January 1, 1996, Article VII of the Plan is amended to provide as follows:
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ARTICLE VII
LIMITATIONS ON CONTRIBUTIONS
7.01 Definitions
For purposes of this Article VII, the following terms have the
following meanings:
(a) The "actual deferral percentage" with respect to a Participant
for a particular Plan Year means the ratio of the Salary Deferral
Contributions made on his behalf for the Plan Year to his test
compensation for the Plan Year, except that, to the extent
permitted by regulations issued under Section 401(k) of the Code,
the Company may elect to take into account in computing the
numerator of each Participant's actual deferral percentage the
Employer Qualified Nonelective Contributions made to the Plan on
his behalf for the Plan Year, but only if such Employer Qualified
Nonelective Contributions are qualified nonelective
contributions; provided, however, that contributions made on a
Participant's behalf for a Plan Year shall be included in
determining his actual deferral percentage for such Plan Year
only if the contributions are made to the Plan prior to the end
of the 12-month period immediately following the Plan Year to
which the contributions relate. The determination and treatment
of the actual deferral percentage amounts for any Participant
shall satisfy such other requirements as may be prescribed by
the Secretary of the Treasury.
(b) The "aggregate limit" means the sum of (i) 125 percent of the
greater of the average contribution percentage for Participants
other than Highly Compensated Employees or the average actual
deferral percentage for Participants other than Highly
Compensated Employees and (ii) the lesser of 200 percent or two
plus the lesser of such average contribution percentage or
average actual deferral percentage, or, if it would result in a
larger aggregate limit, the sum of (iii) 125 percent of the
lesser of the average contribution percentage for Participants
other than Highly Compensated Employees or the average actual
deferral percentage for Participants other than Highly
Compensated Employees and (iv) the lesser of 200 percent or two
plus the greater of such average contribution percentage or
average actual deferral percentage.
(c) The "annual addition" with respect to a Participant for a
limitation year means the sum of the Salary Deferral
Contributions and Employer Contributions allocated to his
Separate Account for the limitation year (including any amounts
that are distributed pursuant to Section 7.05 and 7.07, the
employer contributions, employee contributions, and forfeitures
allocated to his accounts for the limitation year under any
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other qualified defined contribution plan (whether or not
terminated) maintained by an Employer or any other member of the
Controlled Group, and amounts described in Sections 415(l)(2)and
419A(d)(2) of the Code allocated to his account for the
limitation year.
(d) The "Code Section 402(g) limit" means the dollar limit imposed
by Section 402(g)(1) of the Code or established by the Secretary
of the Treasury pursuant to Section 402(g)(5) of the Code in
effect on January 1 of the calendar year in which a Participant's
taxable year begins.
(e) The "contribution percentage" with respect to a Participant for
a particular Plan Year means the ratio of the sum of the Basic
Employer Matching Contributions and Additional Employer
Matching Contributions made to the Plan on his behalf for the
Plan Year to his test compensation for such Plan Year, except
that, to the extent permitted by regulations issued under
Section 401(m) of the Code, the Company may elect to take into
account in computing the numerator of each Participant's
contribution percentage the Salary Deferral Contributions or
Employer Qualified Nonelective Contributions made to the Plan on
his behalf for the Plan Year, but only if such Employer
Qualified Nonelective Contributions are qualified nonelective
contributions; provided, however, that any Salary Deferral
Contributions or Employer Qualified Nonelective Contributions
that were taken into account in computing the numerator of a
Participant's actual deferral percentage may not be taken into
account in computing the numerator of his contribution
percentage; and provided, further, that contributions made by or
on a Participant's behalf for a Plan Year shall be included in
determining his contribution percentage for such Plan Year only
if the contributions are made to the Plan prior to the end of
the 12-month period immediately following the Plan Year to which
the contributions relate. The determination and treatment of
the contribution percentage amounts for any Participant shall
satisfy such other requirements as may be prescribed by the
Secretary of the Treasury.
(f) An "elective contribution" means any employer contribution made
to a plan maintained by an Employer or any other member of the
Controlled Group on behalf of a Participant in lieu of cash
compensation pursuant to his written election to defer under any
qualified cash or deferred arrangement as described in Section
401(k) of the Code, any simplified employee pension cash or
deferred arrangement as described in Section 402(h)(1)(B) of the
Code, any eligible deferred compensation plan under Section 457
of the Code, or any plan as described in Section 501(c)(18) of
the Code, and any contribution made on behalf of the Participant
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<PAGE>
by an Employer or any other member of the Controlled Group for
the purchase of an annuity contract under Section 403(b) of the
Code pursuant to a salary reduction agreement.
(g) An "excess deferral" with respect to a Participant means that
portion of a Participant's Salary Deferral Contributions that,
when added to amounts deferred under other plans or arrangements
described in Sections 401(k), 408(k), or 403(b) of the Code,
would exceed the Code Section 402(g) limit and is includable in
the Participant's gross income under Section 402(g) of the Code.
(h) A "family member" of an Employee means the Employee's spouse,
his lineal ascendants, his lineal descendants, and the spouses of
such lineal ascendants and descendants.
(i) A "limitation year" means the Plan Year or such other 12-month
period designated as such by the Company.
(j) A "matching contribution" means any employer contribution
allocated to a Participant's account under the Plan or any other
plan of an Employer or any other member of the Controlled Group
solely on account of elective contributions made on his behalf
or employee contributions made by him.
(k) A "qualified nonelective contribution" means any employer
contribution made on behalf of a Participant that the Participant
could not elect instead to receive in cash, that is a qualified
nonelective contribution as defined in Section 401(k) and
Section 401(m) of the Code and regulations issued thereunder, is
nonforfeitable when made, and is distributable only as permitted
in regulations issued under Section 401(k) of the Code.
(l) The "test compensation" of a Participant for a Plan Year means
compensation as defined in Section 414(s) of the Code and
regulations issued thereunder, limited, however, to (1) $200,000
for Plan Years beginning on or after January 1, 1989 but prior
to January 1, 1994, or (2) $150,000 for Plan Years beginning on
or after January 1, 1994 (subject to adjustment annually at the
same time and in the same manner as under Section 415(d) of the
Code as modified by Section 401(a)(17) of the Code; provided,
however, that the dollar increase in effect on January 1 of any
calendar year is effective for Plan Years beginning in such
calendar year). If the test compensation of a Participant is
determined over a period of time that contains fewer than 12
calendar months, then the annual compensation limitation
described above shall be adjusted with respect to that
Participant by multiplying the annual compensation limitation in
effect for the Plan Year by a fraction the numerator of which is
the number of full months in the period and the denominator of
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<PAGE>
which is 12; provided, however, that no proration is required
for a Participant who is covered under the Plan for less than
one full Plan Year if the formula for allocations is based on
Compensation for a period of at least 12 months. In determining
the test compensation, for purposes of applying the annual
compensation limitation described above, of a Participant who
is a five-percent owner or among the ten Highly Compensated
Employees receiving the greatest test compensation for the
limitation year, the test compensation of the Participant's
spouse and of his lineal descendants who have not attained
age 19 as of the close of the limitation year shall be included
as test compensation of the Participant for the limitation year.
If as a result of applying the family aggregation rule described
in the preceding sentence the annual compensation limitation
would be exceeded, the limitation shall be prorated among the
affected family members in proportion to each member's test
compensation as determined prior to application of the family
aggregation rules.
7.02 Code Section 402(g) Limit
In no event shall the amount of the Salary Deferral Contributions
made on behalf of a Participant for his taxable year, when aggregated
with any elective contributions made on behalf of the Participant
under any other plan of an Employer or any other member of the
Controlled Group for his taxable year, exceed the Code Section 402(g)
limit. In the event that the Plan Administrator determines that the
reduction percentage elected by a Participant will result in his
exceeding the Code Section 402(g) limit, the Plan Administrator may
adjust the reduction authorization of such Participant by reducing
the percentage of his Salary Deferral Contributions to such smaller
percentage that will result in the Code Section 402(g) limit not
being exceeded. If the Plan Administrator determines that the Salary
Deferral Contributions made on behalf of a Participant would exceed
the Code Section 402(g) limit for his taxable year, the Salary
Deferral Contributions for such Participant shall be automatically
suspended for the remainder, if any, of such taxable year.
7.03 Distribution of Excess Deferrals
If an Employer notifies the Plan Administrator that the Code
Section 402(g) limit has been exceeded by a Participant for his
taxable year, the excess deferrals plus any income and minus any
losses attributable thereto, shall be distributed to the Participant
no later than the April 15 immediately following such taxable year.
Any Salary Deferral Contributions that are distributed to a
Participant in accordance with this Section 7.03 shall not be taken
into account in computing the Participant's actual deferral
percentage for the Plan Year in which the Salary Deferral
Contributions were made, unless the Participant is a Highly
Compensated Employee. If an amount of Salary Deferral Contributions
is distributed to a Participant in accordance with this Section 7.03,
matching contributions that are attributable solely to the
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<PAGE>
distributed Salary Deferral Contributions, plus any income and minus
any losses attributable thereto, shall be distributed to the
Participant as provided in Section 7.07.
Notwithstanding any other provision of the Plan to the contrary, If a
Participant notifies the Plan Administrator in writing no later than
the March 1 following the close of the Participant's taxable year (1)
that excess deferrals have been made on his behalf under the Plan and
any other plan for such taxable year and (2) the amount of such
excess deferrals which are to be allocated to the Plan, the excess
deferrals, plus any income and minus any losses attributable thereto,
may be distributed to the Participant no later than the April 15
immediately following such taxable year. Any Salary Deferral
Contributions that are distributed to a Participant in accordance
with this Section 7.03 shall nevertheless be taken into account in
computing the Participant's actual deferral percentage for the Plan
Year in which the Salary Deferral Contributions were made. If an
amount of Salary Deferral Contributions is distributed to a
Participant in accordance with this Section 7.03, matching
contributions that are attributable solely to the distributed Salary
Deferral Contributions, plus any income and minus any losses
attributable thereto, shall be distributed to the Participant as
provided in Section 7.07.
7.04 Limitation on Salary Deferral Contributions of Highly Compensated
Employees
Notwithstanding any other provision of the Plan to the contrary, the
Salary Deferral Contributions made with respect to a Plan Year on
behalf of Participants who are Highly Compensated Employees may not
result in an average actual deferral percentage for such Participants
that exceeds the greater of:
(a) a percentage that is equal to 125 percent of the average actual
deferral percentage for all other Participants; or
(b) a percentage that is not more than 200 percent of the average
actual deferral percentage for all other Participants and that
is not more than two percentage points higher than the average
actual deferral percentage for all other Participants.
In order to assure that the limitation contained herein is not
exceeded with respect to a Plan Year, the Plan Administrator is
authorized to suspend completely further Salary Deferral Contributions
on behalf of Highly Compensated Employees for any remaining portion
of a Plan Year or to adjust the projected actual deferral percentages
of Highly Compensated Employees by reducing their percentage
elections with respect to Salary Deferral Contributions for any
remaining portion of a Plan Year to such smaller percentages that
will result in the limitation set forth above not being exceeded.
In the event of any such suspension or reduction, Highly Compensated
Employees affected thereby shall be notified of the reduction or
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suspension as soon as possible and shall be given an opportunity to
make a new Salary Deferral Contribution election to be effective the
first day of the next following Plan Year. In the absence of such an
election, the election in effect immediately prior to the suspension
or adjustment described above shall be reinstated as of the first
day of the next following Plan Year.
For purposes of applying the imitation contained in this Section 7.04,
the Salary Deferral Contributions and test compensation of any
Participant who is a family member of another Participant who is a
five percent owner or among the ten Highly Compensated Employees
receiving the greatest test compensation for the Plan Year shall be
aggregated with the Salary Deferral Contributions and test
compensation of such other Participant, and such family member shall
not be considered a Participant for purposes of determining the
average actual deferral percentage for all other Participants.
In determining the actual deferral percentage for any Participant who
is a Highly Compensated Employee for the Plan Year, elective
contributions made to his accounts under any other plan of an Employer
or any other member of the Controlled Group shall be treated as if
all such contributions were made to the Plan; provided, however, that
if such a plan has a plan year different from the Plan Year, any such
contributions made to the Highly Compensated Employee's accounts
under the plan for the plan year ending with or within the same
calendar year as the Plan Year shall be treated as if such
contributions were made to the Plan. Notwithstanding the foregoing,
such contributions shall not be treated as if they were made to the
Plan if regulations issued under Section 401(k) of the Code do not
permit such plan to be aggregated with the Plan.
If one or more plans of an employer or any other member of the
Controlled Group are aggregated with the Plan for purposes of
satisfying the requirements of Section 401(a)(4) or 410(b) of the
Code, then actual deferral percentages under the Plan shall be
calculated as if the Plan and such one or more other plans were a
single plan. Plans may be aggregated to satisfy Section 401(k) of
the Code only if they have the same plan year.
The Plan Administrator shall maintain records sufficient to show that
the limitation contained in this Section 7.04 was not exceeded with
respect to any Plan Year.
7.05 Distribution of Excess Salary Deferral Contributions
Notwithstanding any other provision of the Plan to the contrary, in
the event that the limitation contained in Section 7.04 is exceeded
in any Plan Year, the Salary Deferral Contributions made with respect
to a Highly Compensated Employee that exceed the maximum amount
permitted to be contributed to the Plan on his behalf under
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Section 7.04, plus any income and minus any losses attributable
thereto, shall be distributed to the Highly Compensated Employee
prior to the end of the next succeeding Plan Year. If excess amounts
are attributable to Participants aggregated under the family
aggregation rules described in Section 7.04, the excess shall be
allocated among family members in proportion to the Salary Deferral
Contributions made with respect to each family member. If such
excess amounts are distributed more than 2 1/2 months after the last
day of the Plan Year for which the excess occurred, an excise tax may
be imposed under Section 4979 of the Code on the Employer maintaining
the Plan with respect to such amounts.
The maximum amount permitted to be contributed to the Plan on a Highly
Compensated Employee's behalf under Section 7.04 shall be determined
by reducing Salary Deferral Contributions made behalf of Highly
Compensated Employees in order of their actual deferral percentages
beginning with the highest of such percentages. The determination of
the amount of excess Salary Deferral Contributions shall be made
after application of Section 7.03, if applicable.
If an amount of Salary Deferral Contributions is distributed to a
Participant in accordance with this Section 7.05, matching
contributions that are attributable solely to the distributed Salary
Deferral Contributions, plus any income and minus any losses
attributable thereto, shall be distributed to the Participant as
provided in Section 7.07.
7.06 Limitation on Matching Contributions of Highly Compensated Employees
Notwithstanding any other provision of the Plan to the contrary, the
Basic Employer Matching Contributions and Additional Employer
Matching Contributions made with respect to a Plan Year on behalf of
Participants who are Highly Compensated Employees may not result in
an average contribution percentage for such Participants that exceeds
the greater of:
(a) a percentage that is equal to 125 percent of the average
contribution percentage for all other Participants; or
(b) a percentage that is not more than 200 percent of the average
contribution percentage for all other Participants and that is
not more than two percentage points higher than the average
contribution percentage for all other Participants.
For purposes of applying the limitation contained in this
Section 7.06, the Basic Employer Matching Contributions, Additional
Employer Matching Contributions, Salary Deferral Contributions, and
Employer Qualified Nonelective Contributions (to the extent that such
Salary Deferral Contributions or Employer Qualified Nonelective
Contributions are taken into account in computing contribution
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percentages), and test compensation of any Participant who is a
family member of another Participant who is a five percent owner or
among the ten Highly Compensated Employees receiving the greatest test
compensation for the Plan Year shall be aggregated with the Basic
Employer Matching Contributions, Additional Employer Matching
Contributions, Salary Deferral Contributions, Employer Qualified
Nonelective Contributions, and test compensation of such other
Participant, and such family member shall not be considered a
Participant for purposes of determining the average contribution
percentage for all other Participants.
In determining the contribution percentage for any Participant who
is a Highly Compensated Employee for the Plan Year, matching
contributions, employee contributions, elective contributions, and
qualified nonelective contributions (to the extent that elective
contributions and qualified nonelective contributions are taken into
account in computing contribution percentages) made to his accounts
under any other plan of an Employer or any other member of the
Controlled Group shall be treated as if all such contributions were
made to the Plan; provided, however, that if such a plan has a plan
year different from the Plan Year, any such contributions made to the
Highly Compensated Employee's accounts under the plan for the plan
year ending with or within the same calendar year as the Plan Year
shall be treated as if such contributions were made to the Plan.
Notwithstanding the foregoing, such contributions shall not be
treated as if they were made to the Plan if regulations issued under
Section 401(m) of the Code do not permit such plan to be aggregated
with the Plan.
If one or more plans of an Employer or any other member of the
Controlled Group are aggregated with the Plan for purposes of
satisfying the requirements of Section 401(a)(4) or 410(b) of the
Code, the contribution percentages under the Plan shall be calculated
as if the Plan and such one or more other plans were a single plan.
Plans may be aggregated to satisfy Section 401(m) of the Code only if
they have the same plan year.
The Plan Administrator shall maintain records sufficient to show that
the limitation contained in this Section was not exceeded with
respect to any Plan Year and the amount of the elective contributions
and qualified nonelective contributions taken into account in
computing contribution percentages for any Plan Year.
7.07 Distribution of Excess Matching ContributionsContributions
Notwithstanding any other provision of the Plan to the contrary, in
the event that the limitation contained in Section 7.06 is exceeded
in any Plan Year, the matching contributions made to the Plan on
behalf of a Highly Compensated Employee that exceed the maximum
amount permitted to be contributed to the Plan on behalf of such
Highly Compensated Employee under Section 7.06, plus any income and
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minus any losses attributable thereto, shall be distributed prior to
the end of the next succeeding Plan Year as hereinafter provided.
If excess amounts are attributable to Participants aggregated under
the family aggregation rules described in Section 7.05, the excess
shall be allocated among family members in proportion to the matching
contributions made to the Plan with respect to each family member.
If such excess amounts are distributed more than 2~1/2 months after
the last day of the Plan Year for which the excess occurred, an
excise tax may be imposed under Section 4979 of the Code on the
Employer maintaining the Plan with respect to such amounts.
The maximum amount permitted to be contributed to the Plan on behalf
of a Highly Compensated Employee under Section 7.06 shall be
determined by reducing matching contributions made to the Plan on
behalf of Highly Compensated Employees in order of their contribution
percentages beginning with the highest of such percentages.
The determination of the amount of excess matching contributions shall
be made after application of Section 7.03, if applicable, and after
application of Section 7.05, if applicable.
7.08 Multiple Use Limitation
Notwithstanding any other provision of the Plan to the contrary, the
following multiple use limitation as required under Section 401(m) of
the Code shall apply: the sum of the average actual deferral
percentage for Eligible Employees who are Highly Compensated
Employees and the average contribution percentage for Participants
who are Highly Compensated Employees may not exceed the aggregate
limit. In the event that, after satisfaction of Section 7.05 and
Section 7.07, it is determined that contributions under the Plan fail
to satisfy the multiple use imitation contained herein, the multiple
use limitation shall be satisfied by further reducing the contribution
percentages of Participants who are Highly Compensated Employees
(beginning with the highest such percentage) to the extent necessary
to eliminate the excess, with such further reductions to be treated
as excess matching contributions and disposed of as provided in
Section 7.07.
7.09 Determination of Income or Loss
The income or loss attributable to excess amounts that are distributed
pursuant to Section 7.05 or 7.07 shall be determined for the Plan
Year to which such amounts relate under the method otherwise used for
allocating income or loss to Participants' Separate Accounts. The
income attributable to excess amounts that are distributed pursuant
to Section 7.10 shall be determined for the Plan Year to which such
amounts relate and the period from the end of such Plan Year to the
date of distribution under the method otherwise used for allocating
income to Participants' Separate Accounts.
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7.10 Code Section 415 Limitations on Crediting of Contributions and
Forfeitures
Notwithstanding any other provision of the Plan to the contrary, the
annual addition with respect to a Participant for a limitation year
shall in no event exceed the lesser of (i) the greater of $30,000 or
25 percent of the defined benefit dollar limitation set forth in
Section 415(b)(1) of the Code in effect for the limitation year or
(ii) 25 percent of the Participant's compensation, as defined in
Section 415(c)(3) of the Code and regulations issued thereunder. If
the annual addition to the Separate Account of a Participant in any
limitation year would otherwise exceed the amount that may be applied
for his benefit under the limitation contained in this Section 7.10,
the limitation shall be satisfied by reducing contributions made on
behalf of the Participant to the extent necessary in the following
order:
(a) Salary Deferral Contributions made on the Participant's behalf
for the limitation year that have not been matched, if any, shall
be reduced.
(b) Salary Deferral Contributions made on the Participant's behalf
for the limitation year that have been matched, if any, and the
matching contributions attributable thereto shall be reduced pro
rata.
(c) Employer Qualified Nonelective Contributions made on the
Participant's behalf for the limitation year shall be reduced.
The amount of any such reduction of Salary Deferral Contributions
(plus any income attributable thereto) shall be returned to the
Participant. The amount of any such reduction of Employer
Contributions shall be deemed a forfeiture for the limitation year
and held unallocated in a suspense account. The suspense account
shall be allocated in the same manner as Employer Contributions in
the next limitation year, and each succeeding limitation year if
necessary. If a suspense account is in existence at any time during a
limitation year, all amounts in the suspense account must be
allocated to Participants' Separate Accounts (subject to the
limitations contained herein) before any further Salary Deferral
Contributions or Employer Contributions may be made to the Plan on
behalf of Participants. If a suspense account is in existence at any
time during a limitation year, it shall not share in any increase or
decrease in the net worth of the Trust Fund. For purposes of this
Section 7.10, excesses shall result only from the allocation of
forfeitures, a reasonable error in estimating a Participant's annual
compensation, a reasonable error in determining the amount of elective
deferrals that may be made with respect to any Participant under the
limits of Section 415 of the Code, or other limited facts and
circumstances that justify the availability of the provisions set
forth above.
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7.11 Coverage Under Other Qualified Defined Contribution Plan
If a Participant is covered by any other qualified defined
contribution plan (whether or not terminated) maintained by an
Employer or any other member of the Controlled Group, and if the
annual addition for the limitation year would otherwise exceed the
amount that may be applied for the Participant's benefit under the
limitation contained in Section 7.10, the excess shall be eliminated
by reducing Salary Deferral Contributions and Employer Contributions
under the Plan to the extent necessary, as provided in Section 7.10.
If the limitation in Section 7.10 would still be exceeded after
applying the provisions of Section 7.10, the excess shall be reduced
in the manner specified in such other plan. In the event that a
Participant is covered by a qualified defined benefit plan, the
procedure specified in Section 7.12 shall be implemented prior to
effecting any reduction in the benefit of the Participant under the
defined contribution plans.
7.12 Coverage Under Qualified Defined Benefit Plan
If a Participant in the Plan is also covered by a qualified defined
benefit plan (whether or not terminated) maintained by an Employer or
any other member of the Controlled Group, in no event shall the sum
of the defined benefit plan fraction (as defined in Section 415(e)(2)
of the Code) and the defined contribution plan fraction (as defined
in Section 415(e)(3) of the Code) exceed 1.0 in any limitation year.
If, before October 3, 1973, the Participant was an active participant
in a qualified defined benefit plan maintained by an Employer or any
other member of the Controlled Group and otherwise satisfies the
requirements of Section 2004(d)(2) of ERISA, then for purposes of
applying this Section 7.12, the defined benefit plan fraction shall
not exceed 1.0. In the event the special limitation contained in
this Section 7.12 is exceeded, the benefits otherwise payable to the
Participant under any such qualified defined benefit plan shall be
reduced to the extent necessary to meet such limitation.
If a Participant was a participant in one or more defined contribution
plans maintained by the employer which were in existence on
July 1, 1982, the numerator of the defined contribution plan fraction
(as defined in Section 415(e)(3) of the Code) will be adjusted if the
sum of this fraction and the defined benefit plan fraction (as
defined in Section 415(e)(2) of the Code) would otherwise exceed 1.0
under the terms of the Plan. Under this adjustment, an amount equal
to the product of (1) the excess of the sum of the fractions over
1.0 times (2) the denominator of this fraction, will be permanently
subtracted from the numerator of the defined contribution plan
fraction (as defined in Section 415(e)(3) of the Code). The
adjustment is calculated using the fractions as they would be
computed as of the later of the end of the last limitation year
beginning before January 1, 1983, or September 30, 1983. This
adjustment also will be made if at the end of the last limitation
year beginning before January 1, 1984, the sum of the fractions
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exceeds 1.0 because of accruals or additions that were made before the
limitations of this Article VII became effective as to any plans of
the employer in existence on July 1, 1982.
7.13 Scope of Limitations
The limitations contained in Sections 7.10, 7.11, and 7.12 shall be
applicable only with respect to benefits provided pursuant to defined
contribution plans and defined benefit plans described in
Section 415(k) of the Code.
7.14 Separate Testing
The Plan Administrator may elect for any Plan Year to apply
Section 410(b) of the Code separately to that portion of the Plan
that benefits Participants who have not both attained age 21 and
been credited with a year of service with the Controlled Group, in
accordance with the provisions of Sections 1.410(b)-6(b)(3) and
1.410(b)-7(b)(3) of the Treasury Regulations. In which case, the
requirements of Sections 401(a)(4), 401(k)(3), 401(m)(2), and
401(m)(9) of the Code shall be applied separately with respect to
such portion of the Plan.
13. Effective with respect to Plan Years beginning on or after
January 1, 1996, Article IX of the Plan is amended to provide as follows:
ARTICLE IX
SERVICE
9.01 Crediting of Hours of Service
(a) An Employee shall be credited with an Hour of Service for:
(1) Each hour for which the Employee is directly or indirectly
compensated or entitled to compensation by the Employer or
any other member of the Controlled Group for the performance
of duties during the applicable Computation Period;
(2) Subject to the provisions of Section 9.02, each hour for
which the Employee is directly or indirectly compensated
or entitled to compensation by the Employer or any other
member of the Controlled Group (irrespective of whether the
employment relationship has terminated) for reasons other
than the performance of duties (such as vacation, holidays,
sickness, jury duty, disability, lay-off, military duty or
leave of absence) during the applicable Computation Period;
and
(3) Each hour for which back pay is awarded or agreed to by the
Employer or any other member of the Controlled Group without
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regard to mitigation of damages (provided that the same
Hours of Service shall not be credited under both this
paragraph (3) and paragraph (1) or (2) above).
(b) If an Employee has been granted an Authorized Leave of Absence,
he shall be credited with Hours of Service as if he had been
compensated by the Employer for what would have been his
regularly scheduled hours of work during the period of such
Authorized Leave of Absence. An Employee for whom records of
his actual numbers of Hours of Service are not normally
maintained shall be credited with 10 Hours of Service for each
day of his Authorized Leave of Absence.
(c) Notwithstanding the provisions of subsection (a) above, an
Employee for whom records of his actual number of Hours of
Service are not normally maintained shall be credited with
10 Hours of Service for each day he would be required to be
credited with at least one Hour of Service.
9.02 Limitations on Crediting of Hours of Service
In the application of the provisions of paragraph (2) of
subsection (a) of Section 9.01, the following shall apply:
(a) No more than 501 Hours of Service are required to be credited to
an Employee on account of any single continuous period during
which the Employee performs no duties (whether or not such
period occurs in a single Plan Year);
(b) An hour for which an Employee is directly or indirectly paid or
entitled to payment, on account of a period during which no
duties are performed, is not required to be credited to the
Employee if such payment is made or due under a plan maintained
solely for the purpose of complying with applicable worker's
compensation, unemployment compensation or disability insurance
laws; and
(c) Hours of Service are not required to be credited for a payment
which solely reimburses an Employee for medical or medically
related expenses incurred by the Employee.
(d) A payment shall be deemed to be made by or due from the Employer
or any other member of the Controlled Group regardless of whether
such payment is made by or due from the Employer or any other
member of the Controlled Group directly or indirectly through,
among others, a trust fund, or insurer, to which the Employer or
other member of the Controlled Group contributes or pays premiums
and regardless of whether contributions made or due to the trust
fund, insurer, or other entity are for the benefit of particular
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Employees or are on behalf of a group of Employees in the
aggregate.
9.03 Department of Labor Rules
The provisions of Department of Labor Regulations
Sections 2530.200b-2(b) and (c) are incorporated herein by reference.
9.04 Years of Eligibility Service
The following provisions shall apply in determining the Years of
Eligibility Service for the Employees specified in such provisions:
(a) In determining Years of Eligibility Service, an Employee, other
than an Employee described in the succeeding subsections of this
Section 9.04, shall receive credit for "Eligibility Years of
Service" credited to the Employee pursuant to the terms of the
ALLTEL Corporation Pension Plan (if any) in respect of any
period not otherwise taken into account under the Plan for
purposes of determining Years of Eligibility Service; provided,
however, that there shall be no duplication of Years of
Eligibility Service under the Plan by reason of any restoration
of, crediting of, or granting of service in respect of any single
period or otherwise.
(b) In determining Years of Eligibility Service for an Employee who
was an employee of CP National Corporation or its subsidiaries
prior to January 1, 1990, for a computation period that includes
January 1, 1990, the Employee shall receive credit, for a number
of Hours of Service with respect to any fractional part of a
year of service credited to the Employee as of the close of
business on December 31, 1989 under the provisions of the
Retirement Plan for Employees of CP National Corporation (the
"CPN Plan"), determined by crediting the Employee with 190 Hours
of Service for each 1/12th of a fractional year of service.
Notwithstanding any other provision of this Section 9.04, an
Employee described in the preceding sentence shall not be
credited with less Years of Eligibility Service for service in
the Employee's initial computation period than under the method
for determining eligibility service under the CPN Plan.
(c) In determining Years of Eligibility Service for an Employee who
was an employee of HWC Distribution Corp. or one of its
subsidiaries ("HWC") immediately prior to the date as of which
HWC became a member of the Controlled Group, the Employee's
period or periods of employment with HWC prior to the date as of
which HWC became a member of the Controlled Group that would
have been taken into account under the Plan if such period or
periods of employment were service with a member of the
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Controlled Group, shall be counted as Years of Eligibility
Service. Notwithstanding any other provision of the Plan, there
shall be no duplication of Years of Eligibility Service under
the Plan by reason of service (or hours of service) in respect
of any single period or otherwise.
(d) Each person who became an Employee of Systematics Information
Services, Inc. or its subsidiaries (or Systematics, Inc. or its
subsidiaries) pursuant to a Facilities Management Agreement prior
to January 1, 1995, became an Employee of Systematics Information
Services, Inc. or its subsidiaries pursuant to a Facilities
Management Agreement on or after January 1, 1995, but prior to
February 15, 1995, or becomes an Employee of ALLTEL Information
Services, Inc. or its subsidiaries pursuant to a Facilities
Management Agreement on or after February 15, 1995, shall be
credited with Years of Eligibility Service for service with a
prior employer to the extent, if any, provided in the Facilities
Management Agreement.
(e) In determining the Years of Eligibility Service for an Employee
who was an employee of GTE Directories Service Corporation or one
of its subsidiaries ("GTE Directories") immediately prior to
October 15, 1993 and became an Employee on October 15, 1993 in
connection with the Purchase and Sale Agreement dated
May 18, 1993 between GTE Directories Service Corporation and
ALLTEL Publishing Corporation, the Employee's period or periods
of employment with GTE Directories and its affiliated
corporations prior to October 15, 1993 that would have been taken
into account under the Plan if such period or periods of
employment were service with a member of the Controlled Group,
shall be counted as Years of Eligibility Service.
Notwithstanding any other provision of the Plan, there shall be
no duplication of Years of Eligibility Service under the Plan by
reason of service (or hours of service) in respect of any single
period or otherwise.
(f) In determining Years of Eligibility Service for an Employee who
was an employee of Dime Savings Bank, F.S.B. ("Dime") immediately
prior to October 28, 1995, and became an Employee on
October 28, 1995, the Employee's period or periods of employment
with Dime prior to October 28, 1995, that would have been taken
into account under the Plan if such period or periods of
employment were service with a member of the Controlled Group,
shall be counted as Years of Eligibility Service.
Notwithstanding any other provision of the Plan, there shall be
no duplication of Years of Eligibility Service under the Plan by
reason of service (or hours of service) in respect of any single
period or otherwise.
(g) In determining Years of Eligibility Service for an Employee who
was an employee of Glendale Federal Bank, F.S.B. ("Glendale")
immediately prior to December 1, 1995, and became an Employee on
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December 1, 1995, the Employee's period or periods of employment
with Glendale prior to December 1, 1995, that would have been
taken into account under the Plan if such period or periods of
employment were service with a member of the Controlled Group,
shall be counted as Years of Eligibility Service.
Notwithstanding any other provision of the Plan, there shall be
no duplication of Years of Eligibility Service under the Plan by
reason of service (or hours of service) in respect of any single
period or otherwise.
14. Effective for periods beginning on or after September 1, 1996,
Article X of the Plan is amended to provide as follows:
ARTICLE X
ELIGIBILITY AND PARTICIPATION
10.01 Eligibility and Participation
An Eligible Employee shall become a Participant as follows:
(a) For all purposes of the Plan other than with respect to Employer
Qualified Nonelective Contributions, each Eligible Employee shall
become a Participant on the date on which he becomes an Eligible
Employee. Each Eligible Employee who becomes a Participant
pursuant to this subsection (a) may elect to become an Electing
Participant in accordance with Section 12.01.
(b) For all purposes of the Plan with respect to Employer Qualified
Nonelective Contributions, each Eligible Employee shall become a
Participant on the date following his completion of one Year of
Eligibility Service, provided that his employment has not
terminated and he remains an Eligible Employee on such date.
10.2 Termination and Rehiring
If an Eligible Employee whose service terminated and who is
subsequently rehired by an Employer had met the requirements of
both subsection (a) and subsection (b) of Section 10.01 when his
service terminated, the Eligible Employee shall become eligible
to participate in the Plan for all purposes of the Plan on his
Reemployment Commencement Date.
If an Eligible Employee whose service terminated and who is
subsequently rehired by an Employer had met the requirements of
subsection (a) but not subsection (b) of Section 10.01 when his
service terminated, the Eligible Employee shall become eligible
to participate in the Plan (i) for all purposes of the Plan other
than with respect to Employer Qualified Nonelective
Contributions, on his Reemployment Commencement Date and (ii) for
all purposes of the Plan with respect to Employer Qualified
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Nonelective Contributions, on the date following his completion
of one Year of Eligibility Service, provided that his employment
has not terminated and he remains an Eligible Employee on such
date.
10.03 Duration of Participation
Once an Eligible Employee becomes a Participant, he shall remain a
Participant (1) while he is an Employee, for so long as a portion of
the Trust is credited to his Separate Account whether or not he
continues to be an Eligible Employee, or (2) while he is not an
Employee, for so long as a portion of the Trust is credited to his
Separate Account or, if earlier, until his death. If a Participant
ceases to be an Eligible Employee, no further Salary Deferral
Contributions may be made on his behalf and no further Employer
Contributions shall be allocated to his Separate Account, except as
provided in clause (2) or (3) of the first paragraph of Section 13.07.
A Participant who is on an Authorized Leave of Absence shall continue
as a Participant but no Salary Deferral Contributions or Employer
Contributions shall be made to his Separate Account for any Plan Year
during which he does not receive Compensation from an Employer.
15. Effective with respect to Plan Years beginning on or after
January 1, 1996, the Plan is amended by deleting the term "Active Participant"
therefrom and substituting the term "Electing Participant" therefor, by
deleting the term "Active Participants" therefrom and substituting the term
"Electing Participants" therefor, and by deleting the term "Active
Participant's" therefrom and substituting the term "Electing Participant's"
therefor, in each place such terms appear.
16. Effective for periods on or after September 1, 1996,
Section 12.08 of the Plan is amended by deleting the second paragraph
therefrom.
17. Effective with respect to Plan Years beginning on or after
January 1, 1996, Article XIII of the Plan is amended to provide as follows:
ARTICLE XIII
EMPLOYER CONTRIBUTIONS AND ALLOCATIONS
13.01 Employer Qualified Nonelective Contributions
For each Plan Year, each Employer shall make an Employer Qualified
Nonelective Contribution under the Plan in an amount equal to one
percent of the Compensation of persons eligible to share in the
allocation of Employer Qualified Nonelective Contributions in
accordance with Section 13.07.
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13.02 Basic Employer Matching Contributions
For each Plan Year, a Matching Employer may, in its sole discretion,
make a Basic Matching Contribution or more than one Basic Employer
Matching Contribution under the Plan in an amount or amounts, if any,
that the Company, in its sole discretion, shall determine.
13.03 Additional Employer Matching Contributions
For each Plan Year, a Matching Employer may, in its sole discretion,
make an Additional Matching Contribution or more than one Additional
Employer Matching Contribution under the Plan in an amount or amounts,
if any, that the Company, in its sole discretion, shall determine.
13.04 Allocation of Employer Qualified Nonelective Contributions
As of the last Valuation Date of each Plan Year, after making the
credits or debits to Participants' Separate Accounts required by
Section 11.07, an amount equal to the Employer Qualified Nonelective
Contribution for the Plan Year shall be allocated and credited to the
Employer Contribution Account of each Participant in the Plan who is
eligible (in accordance with Section 13.07) to share in the allocation
of the Employer Qualified Nonelective Contribution for the Plan Year
in an amount equal to one percent of his Compensation for the Plan
Year.
13.05 Allocation of Basic Employer Matching Contributions
As of the last Valuation Date of each Plan Year, after making the
credits or debits to Participants' Separate Accounts required by
Section 11.07, an amount equal to the Basic Employer Matching
Contribution(s) for the Plan Year shall be allocated and credited to
the Employer Contribution Accounts of those Participants in the Plan
who are eligible (in accordance with Section 13.07) to share in the
allocation of the Basic Employer Matching Contribution(s) for the Plan
Year and who during such Plan Year were Eligible Employees of a
Matching Employer that made a Basic Matching Contribution to the Plan
for such Plan Year. The allocation of the Basic Employer Matching
Contribution(s) for a Plan Year shall be in the proportion which the
Matched Salary Deferral Contributions for the Plan Year made on behalf
of a Participant eligible (in accordance with Section 13.07) to share
in the allocation of the Basic Employer Matching Contribution(s) for
the Plan Year bear to the aggregate Matched Salary Deferral
Contributions made during the Plan Year for all Participants who are
eligible (in accordance with Section 13.07) to share in the allocation
of the Basic Employer Matching Contribution(s) for the Plan Year.
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13.06 Allocation of Additional Employer Matching Contributions
As of the last Valuation Date of each Plan Year, after making the
credits or debits to Participants' Separate Accounts required by
Section 11.07, an amount equal to the Additional Employer Matching
Contribution(s) for the Plan Year shall be allocated and credited to
the Employer Contribution Accounts of those Participants in the Plan
who are eligible (in accordance with Section 13.07) to share in the
allocation of the Additional Employer Matching Contribution(s) for
the Plan Year and who during such Plan Year were Eligible Employees
of a Matching Employer that made an Additional Matching Contribution
to the Plan for such Plan Year. The allocation of the Additional
Employer Matching Contribution(s) for a Plan Year shall be in the
proportion which the Matched Salary Deferral Contributions for the
Plan Year that are in excess of three percent of his Compensation for
the Plan Year but not in excess of six percent of his Compensation
for the Plan Year made on behalf of a Participant eligible (in
accordance with Section 13.07) to share in the allocation of the
Additional Employer Matching Contribution(s) for the Plan Year bear
to the aggregate Matched Salary Deferral Contributions that are in
excess of three percent of a Participant's Compensation for the Plan
Year but not in excess of six percent of a Participant's Compensation
for the Plan Year made during the Plan Year for all Participants who
are eligible (in accordance with Section 13.07) to share in the
allocation of the Additional Employer Matching Contribution(s) for
the Plan Year.
13.07 Eligibility to Share in Allocation of Employer Contributions
A person shall be eligible to share in the allocation of Employer
Contributions, if any, for a Plan Year only if he:
(1) is in the active service of the Employer as an Eligible Employee
on the last Valuation Date of the Plan Year (i.e., whose service
has not terminated prior to the last business day of the Plan
Year),
(2) is not in active service because of termination of service
during the Plan Year after attaining age 65, because of Total
and Permanent Disability, or death, or, for Plan Years beginning
on or after January 1, 1996, because of termination of service
after meeting the age and service requirements for early
retirement under the ALLTEL Corporation Pension Plan or the
ALLTEL Corporation Profit-Sharing Plan (if he had been a
participant thereunder), or
(3) became ineligible by reason of transfer of employment to a
Controlled Group Member that is not an Employer and who would be
an Eligible Employee after such transfer of employment but for
the fact that his employer is not an Employer (provided that he
remains an Eligible Employee but for the fact that his employer
is not an Employer or would otherwise be eligible for an
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allocation of any Employer Contribution as a former Eligible Employee
by reason of termination of service on or after the age of 65 years,
Total and Permanent Disability, death, or, for Plan Years beginning
on or after January 1, 1996, meeting the age and service requirements
for early retirement under the ALLTEL Corporation Pension Plan or the
ALLTEL Corporation Profit-Sharing Plan (if he had been a participant
thereunder),
and, with respect only to Employer Qualified Nonelective
Contributions, he has met the one Year of Eligibility Service
requirement and he has a Year of Participation Service for the Plan
Year, and with respect only to Basic Employer Matching Contributions
and Additional Employer Matching Contributions, he is an Electing
Participant in the Plan at any time during the Plan Year.
A Participant described in clause (3) above shall be ineligible to
share in further allocations of Employer Contributions after the Plan
Year in which his transfer of employment occurs unless he again
becomes an Eligible Employee and, with respect to Basic Employer
Matching Contributions or Additional Employer Matching Contributions,
he again becomes an Electing Participant.
For a Plan Year in which a Participant's employment transfers to or
from a Matching Employer who made a Basic Employer Matching
Contribution or an Additional Employer Matching Contribution on
behalf of its eligible participants for the Plan Year, the
Participant's Salary Deferral Contributions for such Plan Year shall
be deemed to be Matched Salary Deferral Contributions or Unmatched
Salary Deferral Contributions as if his employment had been with such
Matching Employer for the entire Plan Year.
A Participant who is on an Authorized Leave of Absence on the last
Valuation Date of a Plan Year or a Participant who is employed by a
member of the Controlled Group who is not an Employer on the last
Valuation Date of the Plan Year in which his employment transferred
to such other member of the Controlled Group shall be deemed to be
actively employed by an Employer on the last Valuation Date of such
Plan Year for purposes of this Section 13.07.
13.08 Timing of Employer Contributions
The Employer Contributions which are to be made for a Plan Year shall
be paid to the Trust from time to time as deemed advisable by the
Employer but in no event later than the earlier of (i) the time
prescribed by law for filing the Employer's Federal income tax return
for its applicable taxable year, including extensions thereof, or
(ii) such time as is required by regulations under Section 401(k)
and/or Section 401(m) of the Code, as applicable. In no event shall
the total amount of Employer Contributions under this Article XIII
exceed the maximum amount deductible in such year, under the
provisions of the Code and applicable Treasury Regulations thereunder.
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13.09 Suspense Account Reduction
Employer Contributions shall be reduced, if necessary, by any amount
held in a suspense account pursuant to Section 7.10.
13.10 Limitations on Employer Contributions
Employer Contributions are subject to all applicable limitations
contained in Article VII.
18. Effective with respect to Plan Years beginning on or after
January 1, 1996, Section 15.04 is amended by deleting the reference to
"Section 13.03" therefrom and substituting a reference to "Section 13.07"
therefor.
IN WITNESS WHEREOF, the Company, by its duly authorized officer,
has caused this Amendment to be executed on this 17th day of November, 1996.
ALLTEL CORPORATION
By: /s/ John L. Comparin
Title: V.P. Human Resources & Administration
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AMENDMENT NO. 5
TO
ALLTEL CORPORATION THRIFT PLAN
(January 1, 1994 Restatement)
WHEREAS, ALLTEL Corporation (the "Company") maintains the ALLTEL
Corporation Thrift Plan, as amended and restated effective January 1, 1994,
and subsequently further amended (the "Plan"); and
WHEREAS, the Company desires further to amend the Plan;
NOW THEREFORE, BE IT RESOLVED, that the Company hereby amends the
Plan in the respects hereinafter set forth:
1. Effective with respect to compensation paid on or after
January 1, 1997, clause (a) of Section 1.08 is amended to provide as follows:
(a) the amounts actually paid to an Eligible Employee by the
Employer for services rendered as reported on the Eligible
Employee's federal income tax withholding statement (Form W-2)
or its subsequent equivalent for the applicable calendar year;
exclusive however, of any such amounts that would not be subject
to tax (for the purposes of the Federal Insurance Contributions
Act) under Section 3101(a) of the Internal Revenue Code
without the dollar limitation of Section 3121(a)(1) of said Code
and exclusive of relocation pay, any non-cash compensation, and
allowances for cost-of-living (other than allowances for
international cost-of-living); and
2. Effective as of May 17, 1996, Section 9.04 is amended by
adding a new subsection (h) immediately following subsection (g) thereof to
provide as follows:
(h) In determining Years of Eligibility Service for an Employee who
was an employee of Citizens Savings Bank ("Citizens Savings")
immediately prior to May 17, 1996, and became an Employee on
May 17, 1996, the Employee's period or periods of employment
with Citizens Savings prior to May 17, 1996, that would have
been taken into account under the Plan if such period or periods
of employment were service with a member of the Controlled
Group, shall be counted as Years of Eligibility Service.
Notwithstanding any other provision of the Plan, there shall be
no duplication of Years of Eligibility Service under the Plan by
reason of service (or hours of service) in respect of any single
period or otherwise.
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3. Effective as of the close of business on December 31, 1996,
or such later date as determined by the Plan Administrator, the Plan is
amended by adding immediately following Article XXV thereof, the following new
Article XXVI:
ARTICLE XXVI
TRANSFER OF BENEFITS TO THE PLAN WITH RESPECT TO
CERTAIN FORMER EMPLOYEES OF
CITIZENS SAVINGS BANK
26.01 Definitions
For purposes of this Article XXVI, the following definitions shall
apply:
(a) "Citizens" shall mean Citizens Savings Bank.
(b) The "Effective Date" shall mean December 31, 1996, or such later
date as determined by the Plan Administrator.
(c) The "Resource Management Agreement" shall mean the Resource
Management Agreement between Citizens Savings Bank and ALLTEL
Financial Information Services Inc., dated May 17, 1996.
(d) The "Transfer Accounts" shall mean the accounts transferred to
the Plan from the Transfer Plan.
(e) A "Transfer Employee" shall mean an employee whose employment
transferred from Citizens Savings Bank to ALLTEL Financial
Information Services, Inc. pursuant to the Resource Management
Agreement.
(f) The "Transfer Plan" shall mean the Citizens Employees' Retirement
Savings Plan.
26.02 Transfer of Accounts
The Company shall direct the Trustee to accept the Transfer Accounts
from the trustee(s) of the Transfer Plan, to be held, administered,
and disposed of by the Trustee, under the terms, conditions, and
provisions of the Plan. Except as otherwise expressly provided in
this Article XXVI, the general provisions of the Plan shall govern
with respect to the Transfer Accounts, to the extent not inconsistent
with any provision of the Transfer Plan that may not be eliminated
under Section 411(d)(6) of the Code.
2
116
<PAGE>
26.03 Establishment of Accounts
As of the Effective Date, Separate Accounts shall be established
(to the extent not previously established) in accordance with the
provisions of Section 11.08 in the name of each Transfer Employee.
In addition to any credits or debits to the Separate Account of the
Transfer Employees made in accordance with the Plan's general
provisions, as of the date the Transfer Accounts are received by the
Trustee and deposited in the Trust Fund there shall be credited to
each such Separate Account or Sub-Account, as applicable, the value
of such Transfer Employee's prior separate account or sub-account of
the corresponding type under the Transfer Plan as certified to the
Plan Administrator by the plan administrator of the Transfer Plan.
26.04 Elections, Waivers, and Beneficiary Designations
Provided that an election, waiver, or beneficiary designation has not
become irrevocable (by reason of death or otherwise), the provisions
of the Plan with respect to elections, waivers, and beneficiary
designations shall apply to the Transfer Accounts.
26.05 Outstanding Loans
Notwithstanding any other provision of the Plan to the contrary, any
outstanding loan of a Transfer Employee under the Transfer Plan shall
be repaid under the Plan by payroll deduction, in accordance with the
loan rules and procedures for the Plan, and otherwise continue to be
administered in accordance with its terms and the applicable
provisions of the Transfer Plan in effect at the time the loan was
granted.
26.06 Vested Interest of Transfer Employees
Each Transfer Employee shall be 100% vested in the entire balance of
his separate account transferred to the Plan from the Transfer Plan.
26.07 Transfer Plan ADP and ACP Test Provisions
Upon written notification from the plan administrator of the Transfer
Plan specifying amounts to be distributed from the Plan from accounts
of highly compensated participants in respect of the average deferral
percentage and average contribution percentage tests for the plan
years of the Transfer Plan ending December 31, 1995, and
December 31, 1996, respectively, the Plan Administrator shall, as
soon as reasonably practicable thereafter, and in no event later than
December 31, 1996, and December 31, 1997, respectively, distribute
such amounts to such Participants in the manner required in respect
of such tests.
3
117
<PAGE>
26.08 Overriding Provisions
The provisions of this Article XXVI shall apply notwithstanding any
other provisions of the Plan, except Section 3.07, and shall override
any conflicting Plan provisions.
IN WITNESS WHEREOF, the Company, by its duly authorized officer,
has caused this Amendment to be executed on this 26th day of October, 1996.
ALLTEL CORPORATION
By: /s/ John L. Comparin
Title: V.P. Human Resources & Administration
118
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
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> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 13,874
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<RECEIVABLES> 554,316
<ALLOWANCES> 21,271
<INVENTORY> 85,970
<CURRENT-ASSETS> 709,468
<PP&E> 5,114,328
<DEPRECIATION> 2,072,789
<TOTAL-ASSETS> 5,359,183
<CURRENT-LIABILITIES> 590,696
<BONDS> 1,756,142
6,455
9,198
<COMMON> 187,200
<OTHER-SE> 1,900,709
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<SALES> 667,573
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<NET-INCOME> 291,737
<EPS-PRIMARY> 1.53
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