UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-4996
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ALLTEL CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 34-0868285
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Allied Drive, Little Rock, Arkansas 72202
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (501) 905-8000
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(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
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Number of common shares outstanding as of June 30, 1998:
184,354,525
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The Exhibit Index is located at sequential page 18.
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<PAGE>
ALLTEL CORPORATION
FORM 10-Q
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
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The following consolidated financial statements of ALLTEL Corporation
and subsidiaries, included in the interim report of ALLTEL Corporation to its
stockholders for periods ended June 30, 1998, a copy of which is attached
hereto, are incorporated herein by reference:
Consolidated Statements of Income - for the three, six and
twelve months ended June 30, 1998 and 1997.
Consolidated Balance Sheets - June 30, 1998 and 1997 and
December 31, 1997.
Consolidated Statements of Cash Flows - for the six and
twelve months ended June 30, 1998 and 1997.
2
<PAGE>
ALLTEL CORPORATION
FORM 10-Q
PART I - FINANCIAL STATEMENTS
Item 2. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
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FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The total capital structure for ALLTEL Corporation ("ALLTEL" or the
"Company") was $4.3 billion at June 30, 1998, reflecting 59 percent common and
preferred equity and 41 percent debt. This compares to a capital structure of
$4.1 billion at December 31, 1997, reflecting 54 percent common and preferred
equity and 46 percent debt. ALLTEL 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 was $397.9 million and $889.8 million for the
six and twelve month periods ended June 30, 1998, respectively, compared to
$306.3 million and $746.7 million for the same periods in 1997. The increases in
the six and twelve month periods reflect growth in the earnings of the Company,
decreased working capital requirements and the timing of additional income tax
payments associated with gains realized from the sale of a portion of ALLTEL's
investment in WorldCom, Inc. common stock, as further discussed below.
Capital expenditures for the six and twelve month periods of 1998 were
$256.8 million and $554.1 million, respectively, compared to $248.3 million and
$489.1 million for the same periods in 1997. During the past two-year period,
the Company funded the majority of its capital expenditures through internally
generated funds. Capital expenditures were incurred to continue to modernize and
upgrade ALLTEL's telecommunications network and to expand into existing
information services markets. In addition, capital expenditures were incurred to
construct additional network facilities to provide Personal Communications
Services ("PCS") and to offer other communications services, including
long-distance, Internet and local competitive access services. Capital
expenditures are forecast at approximately $610 million for 1998, which are
expected to be funded primarily from internally generated funds.
Cash flows from investing activities for the six and twelve month periods of
1997 include a cash outlay of $146.5 million related to the acquisition of PCS
licensing rights. The Company acquired PCS licensing rights for 73 markets in 12
states. Cash flows from investing activities for the six and twelve month
periods of 1997 also include a cash outlay of $40.4 million related to the
acquisition of two wireless properties in Alabama and the purchase of an
additional ownership interest in a Georgia wireless property.
Cash flows from investing activities for both the six and twelve month
periods ended June 30, 1998 include proceeds of $203.3 million primarily related
to the sale of a portion of the Company's investment in WorldCom, Inc. common
stock. In addition, cash flows from investing activities for the twelve month
period ended June 30, 1998 include proceeds of $48.7 million received from the
sale of an investment in a software company completed in September 1997. Cash
flows from investing activities for the six and twelve month period of 1997
include proceeds of $152.0 million received from the sale of assets, principally
consisting of two non-strategic operations. In May 1997, the Company completed
the sale of its wire and cable subsidiary, HWC Distribution Corp. ("HWC"), for
approximately $45.0 million in cash, and in January 1997, the Company received
net proceeds of $104.9 million in connection with the sale of its healthcare
operations. The proceeds from these asset sales were used primarily to reduce
borrowings under the Company's revolving credit agreement.
3
<PAGE>
Included in cash flows from financing activities are dividend payments and
the repurchase by the Company of its common stock. Common and preferred dividend
payments for the six and twelve month periods ended June 30, 1998 were $107.3
million and $210.4 million, respectively, compared to $103.2 million and $202.3
million for the same periods in 1997. The increases in dividend payments in both
periods reflect the October 1997 action of the Board of Directors to increase
the quarterly common stock dividend rate from $.275 per share to $.29 per share.
Under a share repurchase program initiated by ALLTEL in 1996 and expanded in
1997, the Company repurchased approximately 3.9 million of its common shares at
a total cost of $137.3 million during the twelve month period ended June 30,
1998. The Company did not repurchase any of its common stock during the first
six months of 1998. During the twelve month period ended June 30, 1997, ALLTEL
repurchased approximately 3.6 million of its common shares at a total cost of
$113.9 million. Of this total, $38.3 million was spent during the first six
months of 1997.
The Company has a $1 billion line of credit under a revolving credit
agreement. Borrowings outstanding under this agreement at June 30, 1998 were
$93.9 million, compared to $247.9 million that were outstanding at December 31,
1997. Borrowings outstanding under this agreement at June 30, 1997 were $108.8
million. The weighted average interest rate on borrowings outstanding under this
agreement at June 30, 1998, was 5.8 percent. As previously discussed, proceeds
from the sales of WorldCom, Inc. common stock , the wire and cable operations
and the healthcare operations were used primarily to reduce the amount of
borrowings outstanding under the revolving credit agreement. The net reduction
in revolving credit borrowings for the six and twelve months ended June 30,
1998, represents a portion of the long-term debt retired in those periods.
Scheduled long-term debt retirements, net of the revolving credit agreement
activity, amounted to $25.9 million and $49.7 million for the six and twelve
month periods ended June 30, 1998, respectively.
CONSOLIDATED RESULTS OF OPERATIONS
Revenues and sales increased $117.6 million or 14 percent, $180.3 million or
11 percent and $228.9 million or 7 percent for the three, six and twelve month
periods ended June 30, 1998, respectively. Operating income increased $24.3
million or 14 percent, $34.7 million or 10 percent and $188.7 million or 32
percent for the three, six and twelve month periods ended June 30, 1998,
respectively. Growth in revenues and sales in all periods of 1998 was impacted
by the sale of HWC. The sale of information services' healthcare operations also
impacted revenue and sales growth in the twelve month period of 1998. Operating
results for the three, six and twelve month periods ended June 30, 1997, include
non-recurring charges to reduce the carrying value of certain assets, as further
discussed below. Adjusted to exclude these asset dispositions and write-downs,
revenues and sales would have increased $128.9 million or 16 percent, $223.1
million or 14 percent and $406.0 million or 13 percent, and operating income
would have increased $7.8 million or 4 percent, $19.3 million or 5 percent and
$63.3 million or 9 percent for the three, six and twelve months ended June 30,
1998, respectively. As further discussed below, growth in operating income for
all periods of 1998 was impacted by certain start-up costs incurred by the
communications segment in an effort to provide new and expanded service
offerings.
Net income increased $23.0 million or 13 percent, $44.9 million or 16
percent and $161.4 million or 41 percent for the three, six and twelve month
periods ended June 30, 1998, respectively. Basic earnings per common share
increased 15 percent, 18 percent and 44 percent for the three, six and twelve
month periods ended June 30, 1998, respectively. In addition to the sales of HWC
and the healthcare operations, reported net income and earnings per share
amounts were impacted by non-extraordinary, non-recurring items. Excluding the
impact in each period of the asset dispositions and the non-extraordinary,
non-recurring items discussed below, net income would have increased $9.4
million or 10 percent, $18.8 million or 10 percent and $45.6 million or 12
percent, while basic earnings per share would have increased 12 percent in both
the three and six month periods, and 15 percent in the twelve month period ended
June 30, 1998.
4
<PAGE>
Net income and earnings per share adjusted for the asset dispositions and the
non-extraordinary, non-recurring items are summarized in the following table:
<TABLE>
(Dollars in thousands, except per share amounts)
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Three Months Ended Six Months Ended Twelve Months Ended
June 30, June 30, June 30,
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1998 1997 1998 1997 1998 1997
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<S> <C> <C> <C> <C> <C> <C>
Net income, as reported $196,898 $173,890 $320,449 $275,598 $552,737 $391,354
Disposition of healthcare and
wire and cable operations - (181) - (838) - (6,424)
Non-recurring items, net of tax:
Provision to reduce carrying
value of certain assets - 11,744 - 11,744 - 84,460
Gain on disposal of assets (90,189) (88,105) (112,462) (97,326) (135,031) (97,326)
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Net income, as adjusted $106,709 $ 97,348 $207,987 $189,178 $417,706 $372,064
======== ======== ======== ======== ======== ========
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Basic earnings per share, as reported $1.07 $.93 $1.74 $1.47 $2.99 $2.08
Disposition of healthcare and
wire and cable operations - - - - - (.03)
Non-recurring items:
Provision to reduce carrying
value of certain assets - .06 - .06 - .44
Gain on disposal of assets (.49) (.47) (.61) (.52) (.73) (.52)
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Basic earnings per share, as adjusted $.58 $.52 $1.13 $1.01 $2.26 $1.97
==== ==== ===== ===== ===== =====
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</TABLE>
The net income and earnings per share impact of the asset dispositions and the
non-extraordinary, non-recurring items has been presented as supplemental
information only. The non-recurring items reflected in the above table are
discussed in reference to the caption in the consolidated statements of income
in which they are reported.
Provision to Reduce Carrying Value of Certain Assets
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During the second quarter of 1997, the Company recorded a pretax write-down
of $16.9 million to reflect the fair value less cost to sell its wire and cable
subsidiary, HWC. The net income impact of this write-down resulted in a decrease
in net income of $11.7 million or $.06 per share.
During the third quarter of 1996, the Company incurred non-cash, pretax
charges of $120.3 million to adjust 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 reduce the
carrying value of its community banking operations to their estimated fair value
based upon projections of future cash flows. The net income impact of these
write-downs resulted in a decrease in net income of $72.7 million or $.38 per
share.
5
<PAGE>
Gain on Disposal of Assets and Other
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During the second quarter of 1998, the Company recorded a pretax gain of
$148.2 million resulting from the sale of a portion of its investment in
WorldCom, Inc. common stock. This gain increased net income $90.2 million or
$.49 per share. In the first quarter of 1998, the Company recorded a pretax gain
of $36.6 million primarily from the sale of a portion of its investment in
WorldCom, Inc. common stock. This gain resulted in an increase of $22.3 million
in net income and $.12 in earnings per share.
During the third quarter of 1997, the Company recorded a pretax gain of
$34.4 million primarily related to the sale of its investment in a software
company. This gain increased net income $22.6 million or $.12 per share. In the
second quarter of 1997, the Company recorded a pretax gain of $156.0 million
from the sale of a portion of its investment in WorldCom, Inc. common stock.
This transaction resulted in an increase of $88.1 million in net income and $.47
in earnings per share. During the first quarter of 1997, the Company recorded a
pretax gain of $16.2 million from the sale of information services' healthcare
operations. The net income impact from this transaction resulted in an increase
of $9.2 million in net income and $.05 in earnings per share.
RESULTS OF OPERATIONS BY BUSINESS SEGMENT
<TABLE>
Communications-Wireline Operations
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Three Months Ended Six Months Ended Twelve Months Ended
(Dollars in thousands) June 30, June 30, June 30,
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1998 1997 1998 1997 1998 1997
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<S> <C> <C> <C> <C> <C> <C>
Local service $125,472 $115,635 $247,144 $227,525 $ 485,707 $ 448,695
Network access and long-distance 174,191 156,960 345,837 310,064 683,367 604,306
Miscellaneous 41,404 38,699 82,533 74,881 162,852 148,901
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Total revenues and sales $341,067 $311,294 $675,514 $612,470 $1,331,926 $1,201,902
Operating income $109,773 $108,638 $225,428 $214,539 $ 457,339 $ 414,967
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</TABLE>
Wireline revenues and sales increased $29.8 million or 10 percent, $63.0
million or 10 percent and $130.0 million or 11 percent for the three, six and
twelve months ended June 30, 1998, respectively. Wireline operating income
increased $1.1 million or 1 percent, $10.9 million or 5 percent and $42.4
million or 10 percent for the three, six and twelve month periods of 1998,
respectively.
Local service revenues increased $9.8 million or 9 percent, $19.6 million
and 9 percent and $37.0 million or 8 percent in the three, six and twelve month
periods ended June 30, 1998, respectively. Customer access lines increased more
than 6 percent during the past twelve month period, reflecting increased sales
of residential and second access lines. Growth in custom calling and other
enhanced services revenues also contributed to the increases in local service
revenues in all periods of 1998.
Network access and long-distance revenues increased $17.2 million or 11
percent, $35.8 million or 12 percent and $79.1 million or 13 percent for the
three, six and twelve month periods ended June 30, 1998, respectively. The
increases in all periods primarily reflect higher volumes of access usage,
increased customer access lines and growth in ALLTEL's long-distance operations.
During the past twelve month period, the number of long-distance customers grew
to 338,306 from 188,868, an increase of 149,438 customers or 79 percent. As a
result of this strong growth in customers, the long-distance operations
generated growth in operating revenues of $4.4 million, $11.0 million and $28.4
million during the three, six and twelve month periods ended June 30, 1998,
respectively.
6
<PAGE>
On July 12, 1996, the Georgia Public Service Commission ("Georgia PSC")
issued an order requiring that ALLTEL's wireline subsidiaries which operate
within its jurisdiction reduce their annual network access charges by $24
million, prospectively, effective July 1, 1996. The Georgia PSC's action was in
response to the Company's election to move from a rate-of-return method of
pricing to an incentive rate structure, as provided by a 1995 Georgia
telecommunications law. The Company appealed the Georgia PSC order. On
November 6, 1996, the Superior Court of Fulton County, Georgia, (the "Superior
Court") rendered its decision and reversed the Georgia PSC order, finding, among
other matters, that the Georgia PSC had exceeded its authority by conducting a
rate proceeding after the Company's election of alternative regulation. The
Superior Court did not rule on a number of other assertions made by the Company
as grounds for reversal of the Georgia PSC order. The Georgia PSC appealed the
Superior Court's decision, and on July 3, 1997, the Georgia Court of Appeals
reversed the Superior Court's decision. On July 16, 1997, the Georgia Court of
Appeals denied the Company's request to reconsider its decision. On August 5,
1997, the Company filed with the Georgia Supreme Court a petition for writ of
certiorari requesting that the Georgia Court of Appeals' decision be reversed.
On February 5, 1998, the Georgia Supreme Court announced it would review the
Company's petition. A decision by the Georgia Supreme Court is expected later
this year. The Company has not implemented any revenue reductions or established
any reserves for refund related to this matter.
Miscellaneous revenues increased $2.7 million or 7 percent, $7.7 million or
10 percent and $14.0 million or 9 percent for the three, six and twelve month
periods ended June 30, 1998, respectively. Sales of wireline equipment and
wireline equipment protection plans accounted for $0.8 million, $4.3 million and
$12.8 million of the overall increases in miscellaneous revenues for the three,
six and twelve month periods of 1998, respectively. Increases in directory
advertising and equipment rental revenues also contributed to the growth in
miscellaneous revenues in all periods.
Growth in wireline operating income for all periods of 1998 was impacted by
start-up costs incurred by the Company to provide additional communications
services including Internet, local competitive access and network management
services. ALLTEL has begun to offer local access services in select markets
outside its traditional service areas to business customers. Start-up costs
related to the new service offerings reduced wireline operating income by
approximately $5.7 million, $10.6 million and $12.6 million in the three, six
and twelve month periods ended June 30, 1998, respectively. Operating income for
all periods of 1998 also reflects higher expenses due to growth in the
long-distance operations, as well as increases in depreciation, data processing
charges and network-related expenses. Cost of products sold also increased in
all periods consistent with the growth in sales of wireline equipment and
wireline equipment protection plans noted above.
ALLTEL's wireline 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
ALLTEL's wireline 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) increasing competition
that restricts the wireline 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") and state telecommunications reform legislation,
ALLTEL's wireline subsidiaries could begin to experience increased competition
in their local service areas. To date, competition has not had a significant
adverse effect on the operations of ALLTEL's wireline subsidiaries.
7
<PAGE>
In August 1996, the FCC issued regulations implementing the local
competition provisions of the 96 Act. These regulations established pricing
rules for state regulatory commissions to follow with respect to entry by
competing carriers into the local, intrastate markets of incumbent local
exchange carriers ("ILECs") and addressed interconnection, unbundled network
elements and resale rates. The FCC's authority to adopt such pricing rules,
including permitting new entrants to "pick and choose" among the terms and
conditions of approved interconnection agreements, was challenged in federal
court by various ILECs and state regulatory commissions. On July 18, 1997, the
U.S. Eighth Circuit Court of Appeals (the "Eighth Circuit Court") issued its
decision and vacated the FCC's pricing rules including the "pick and choose"
provisions, finding, among other matters, that the FCC had exceeded its
jurisdiction in establishing pricing rules for intrastate communications
services. In responding to petitions for rehearing of its earlier decision, the
Eighth Circuit Court ruled on October 14, 1997, that ILECs are not required by
the 96 Act to recombine network elements purchased by requesting carriers on an
unbundled basis. The FCC asked the U.S. Supreme Court ("Supreme Court") to
review two interconnection decisions of the Eighth Circuit Court, and the
Supreme Court agreed to review these decisions. Oral arguments are scheduled
before the Supreme Court on October 13, 1998.
On May 7, 1997, the FCC issued regulations relating to access charge reform
and universal service. The access charge reform regulations are applicable
mainly to price cap regulated local exchange companies. Since ALLTEL's wireline
subsidiaries are not price cap regulated companies, the access charge
regulations, with few exceptions, are not currently applicable to them. However,
the FCC instituted a rulemaking in June 1998 in which it proposed to amend the
access charge rules for rate-of-return LECs in a manner similar to that earlier
adopted for price cap LECs. The FCC's proposal involves the modification of the
transport rate structure, the reallocation of costs in the transport
interconnection charge, and amendments to reflect changes necessary to implement
universal service. The issue of additional pricing flexibility for
rate-of-return LECs is expected to be addressed in a subsequent phase of the
proceeding. Comments and reply comments on the FCC's proposal are due August
17th and September 17th, respectively. Once the access charge rules for
rate-of-return LECs are finalized, ALLTEL will assess the impact, if any, the
new rules will have on its wireline operations. Based upon ALLTEL's review
of the FCC's regulations concerning the universal service subsidy, it is
unlikely that material changes in the universal service funding for ALLTEL's
wireline subsidiaries will occur prior to 2001. In 2001, the universal service
subsidy is scheduled to change from being based on actual costs to being based
on a proxy model. Since the FCC has not yet defined the structure or content of
any such proxy model, the impact, if any, of this change in the universal
service funding for ALLTEL's wireline subsidiaries cannot be determined at this
time. The impact of the FCC's universal service order on ALLTEL's other
telecommunications operations continues to be evaluated. Petitions for
reconsideration of certain aspects of both the universal service and access
charge reform orders are pending at the FCC. In addition, appeals of certain
aspects of these orders have also been filed with various federal courts of
appeal.
Because resolution of the regulatory matters discussed above that are
currently under FCC and/or judicial review is uncertain and regulations to
implement other provisions of the 96 Act have yet to be issued, the Company
cannot predict at this time the specific effects that the 96 Act and future
competition will have on its wireline subsidiaries.
<TABLE>
Communications-Wireless Operations
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Three Months Ended Six Months Ended Twelve Months Ended
(Dollars in thousands) June 30, June 30, June 30,
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1998 1997 1998 1997 1998 1997
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<S> <C> <C> <C> <C> <C> <C>
Revenues and sales $154,877 $137,711 $295,506 $261,828 $576,404 $509,969
Operating income $ 50,171 $ 44,399 $ 91,181 $ 84,087 $186,924 $164,017
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</TABLE>
Wireless revenues and sales increased $17.2 million or 12 percent, $33.7
million or 13 percent and $66.4 million or 13 percent for the three, six and
twelve month periods ended June 30, 1998, respectively. Operating income
increased $5.8 million or 13 percent, $7.1 million or 8 percent and $22.9
million or 14 percent for the three, six and twelve month periods of 1998,
8
<PAGE>
respectively. During the twelve month period ended June 30, 1998, subscriber
growth remained strong as the number of wireless customers grew to 1,009,556
from 890,017, an increase of 13 percent. During the first six months of 1998,
the Company placed more than 201,000 gross units in service, compared to nearly
188,000 gross units for the same period of 1997. Overall, the Company's market
penetration rate (number of customers as a percent of the total population in
ALLTEL's service areas) increased to 11.3 percent as of June 30, 1998. Customer
churn (average monthly rate of customer disconnects) was 2.2 percent, 2.3
percent and 2.4 percent for the three, six and twelve months ended June 30,
1998, respectively, compared to 2.1 percent, 2.2 percent and 2.3 percent for the
same periods in 1997.
Wireless revenues and sales increased in all periods primarily due to the
growth in its customer base. Increases in local airtime, roaming and
long-distance revenues, reflecting higher volumes of network usage, also
contributed to the growth in revenues and sales in all periods. Growth in
revenues and sales for the six and twelve month periods of 1998 was also
favorably impacted by decreases in uncollectible revenues, reflecting a
reduction in write-offs from bad debts. The increased usage of the Company's
network facilities boosted the average revenue per customer per month for the
second quarter of 1998 to $51 compared to $49 for the first quarter of 1998.
Average revenue per customer per month was $50 and $51 for the six and twelve
months ended June 30, 1998, respectively. On a comparative basis, average
revenue per customer per month for the three, six and twelve month periods ended
June 30, 1997, were $53, $53 and $56, respectively. The declines from 1997 to
1998 in average revenue per customer per month primarily reflect the migration
of existing wireless customers to lower rate plans, and the industry-wide trends
of decreased roaming revenue rates and continued penetration into lower-usage
market segments. During 1997, as a result of increased current and expected
future competition in its service areas, the Company increased its offering of
monthly service plans which have lower base access rates and include more
packaged airtime minutes. The Company expects that average revenue per customer
per month will continue to be impacted by reduced roaming rates and by
penetration into lower-usage market segments. Accordingly, future revenue growth
will be impacted by ALLTEL's success in maintaining customer growth in existing
markets, increasing customer usage of the Company's network and providing
customers with enhanced products and services.
The growth in operating income for all periods of 1998 primarily reflects
the increases in revenues and sales noted above. Improved profit margins
realized on the sale of wireless equipment and a decline in losses sustained
from fraud and bad debts also contributed to the growth in operating income in
all periods. The decline in losses from fraud and bad debts resulted primarily
from actions taken by the Company during the third quarter of 1996 to implement
new technologies to control fraud and to enhance ALLTEL's credit and collection
procedures. The Company will continue to invest in new systems and technologies
to mitigate the occurrence of fraud. Operating income for all periods also
reflects increased expenses for selling and advertising, depreciation and other
operating expenses.
Communications-Other
Other communications services primarily consist of the Company's start-up
PCS operations. The Company began providing PCS service in Jacksonville, Florida
in March 1998, and ALLTEL expects to begin offering PCS service in other markets
later this year. Due to the start-up nature of these operations, other
communications services sustained operating losses of $4.6 million, $5.6 million
and $7.0 million for the three, six and twelve month periods ended June 30,
1998, respectively.
9
<PAGE>
<TABLE>
Information Services
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Three Months Ended Six Months Ended Twelve Months Ended
(Dollars in thousands) June 30, June 30, June 30,
- ----------------------------------------------------------------------------------------------------------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues and sales $297,191 $247,613 $564,052 $464,777 $1,072,648 $963,690
Operating income $ 39,404 $ 35,739 $ 76,267 $ 69,403 $ 152,086 $ 71,391
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</TABLE>
Information services' revenues and sales increased $49.6 million or 20
percent, $99.3 million or 21 percent and $109.0 million or 11 percent for the
three, six and twelve month periods ended June 30, 1998, respectively. Growth in
revenues and sales for the twelve month period was impacted by the sale of the
healthcare operations completed in January 1997. Excluding the sold healthcare
operations, revenues and sales would have increased $172.0 million or 19 percent
in the twelve month period ended June 30, 1998. Revenues and sales increased in
all periods of 1998, primarily due to growth in the financial services,
international and telecommunications outsourcing operations, reflecting volume
growth in existing data processing contracts and the addition of new outsourcing
agreements. The increases in revenues and sales in both periods were partially
offset by contract terminations due primarily to the merger and consolidation
activity in the domestic financial services market. The domestic financial
services industry continues to experience consolidation due to mergers.
Operating income increased $3.7 million or 10 percent, $6.9 million or 10
percent and $80.7 million or 113 percent for the three, six and twelve month
periods ended June 30, 1998, respectively. Operating income for the twelve month
period ended June 30, 1997, was adversely impacted by the $75.0 million
write-down in the carrying value of software and certain other assets during the
third quarter of 1996, as previously discussed. Excluding the impact of the
asset write-downs and the sold healthcare operations, operating income would
have increased $12.2 million or 9 percent for the twelve months ended June 30,
1998. The increases in operating income for all periods of 1998 reflect the
growth in revenues and sales noted above, as well as, improved profit margins
realized from the international financial services business. The increases in
operating income in all periods attributable to revenue growth and increased
profitability of the international operations were partially offset by lower
margins realized by the telecommunications operations. The decrease in
telecommunications operating margins reflects increases in depreciation and
amortization expense and increases in software maintenance and other operating
costs. Depreciation and amortization expense increased in both periods primarily
due to the acquisition of additional data processing equipment and due to an
increase in amortization of internally developed software.
<TABLE>
Product Distribution Operations
- -------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended Twelve Months Ended
(Dollars in thousands) June 30, June 30, June 30,
- -------------------------------------------------------------------------------------------------------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues and sales $111,277 $92,414 $193,050 $200,004 $352,748 $413,824
Operating income $ 4,874 $ 4,213 $ 8,455 $ 8,630 $ 13,782 $ 19,169
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Product distribution's revenues and sales increased $18.9 million or 20
percent, decreased $7.0 million or 3 percent and decreased $61.1 million or 15
percent for the three, six and twelve month periods ended June 30, 1998,
respectively. Operating income increased $0.7 million or 16 percent, decreased
$0.2 million or 2 percent and decreased $5.4 million or 28 percent for the
three, six and twelve month periods ended June 30, 1998, respectively. Revenues
and sales and operating income for all periods of 1997 include the operating
results of HWC, which was sold in May 1997, as previously discussed. Excluding
the impact of HWC's operations in each period, revenues and sales would have
increased $30.2 million or 37 percent, $35.9 million or 23 percent and $53.0
million or 18 percent, while operating income would have increased $1.0 million
or 26 percent, increased $1.3 million or 18 percent and decreased $0.1 million
or 1 percent for the three, six and twelve month periods ended June 30, 1998,
respectively.
10
<PAGE>
Excluding the impact of HWC's operations, revenues and sales would have
increased in all periods of 1998 primarily due to growth in sales of
telecommunications and data products to both affiliated and non-affiliated
customers, including increased retail sales of these products at the Company's
counter showrooms. Sales to affiliates increased in all periods primarily due to
additional purchases made by the Company's wireless subsidiaries, reflecting
expansion of ALLTEL Supply's product lines to include wireless equipment.
Excluding the impact of HWC's operations, operating income would have
increased in the three and six month periods of 1998 primarily due to the
increases in revenues and sales noted above. Growth in operating income for all
periods of 1998 was impacted by lower gross profit margins, reflecting increased
competition from other distributors and from direct sales by manufacturers, a
reduction in product cost rebates received from vendors, and a reduction in
margins earned on affiliated sales. Although revenues and sales net of the HWC
operations increased in the twelve month period of 1998, operating income
decreased due to the impact of the lower gross profit margins discussed above,
and due to increased selling and marketing expenses. The increase in selling and
marketing expenses reflects additional costs incurred by the Company to open
several new counter showroom facilities during the last six months of 1997.
<TABLE>
Other Operations
- -----------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended Twelve Months Ended
(Dollars in thousands) June 30, June 30, June 30,
- -----------------------------------------------------------------------------------------------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues and sales $30,080 $27,848 $53,332 $62,106 $110,106 $125,499
Operating income $ 2,457 $ 1,783 $ 4,215 $ 4,711 $ 8,292 $ 10,444
- -----------------------------------------------------------------------------------------------------
</TABLE>
Other operations revenues and sales increased $2.2 million or 8 percent,
decreased $8.8 million or 14 percent and decreased $15.4 million or 12 percent
for the three, six and twelve month periods ended June 30, 1998, respectively.
Operating income increased $0.7 million or 38 percent, decreased $0.5 million or
11 percent and decreased $2.2 million or 21 percent for the three, six and
twelve month periods ended June 30, 1998, respectively.
Revenues and sales for other operations increased in the three month period
primarily due to an increase in national yellow page advertising revenues. The
decreases in revenues and sales in the six and twelve month periods primarily
reflect the loss of one large directory publishing contract. In addition, other
operations' revenues and sales decreased in the twelve month period due to a
reduction in the number of directories published, as 19 fewer directories were
published during the twelve month period ended June 30, 1998, as compared to the
corresponding twelve month period of 1997. The changes in operating income for
the three, six and twelve month periods of 1998 reflect the changes in directory
publishing revenues noted above.
<TABLE>
- -----------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended Twelve Months Ended
(Dollars in thousands) June 30, June 30, June 30,
- -----------------------------------------------------------------------------------------------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Corporate expenses $5,568 $22,613 $11,941 $27,986 $29,749 $87,034
- -----------------------------------------------------------------------------------------------------
</TABLE>
Corporate expenses decreased $17.0 million or 75 percent, $16.0 million or
57 percent and $57.3 million or 66 percent for the three, six and twelve month
periods ended June 30, 1998, respectively. As previously discussed, corporate
expenses for the three and six month periods ended June 30, 1997 include the
write-down of $16.9 million to reflect the fair value less cost to sell the HWC
operations recorded in the second quarter of 1997. In addition, corporate
expenses for the twelve month period of 1997 also includes the $45.3 million
write-down in the carrying value of goodwill related to HWC recorded in third
quarter of 1996. Excluding the impact of these write-downs in each period,
corporate expenses would have decreased $0.2 million or 3 percent, increased
$0.8 million or 7 percent and increased $4.9 million or 20 percent for the
three, six and twelve month periods ended June 30, 1998. Net of the write-downs,
the increases in corporate expenses in both the six and twelve month periods
reflect increases in advertising and employee benefit costs.
11
<PAGE>
OTHER FINANCIAL STATEMENT ITEMS
Other Income, Net
- -----------------
Other income, net increased $3.6 million or 602 percent, $9.3 million or
more than 1000 percent and $12.3 million or 570 percent for the three, six and
twelve month periods ended June 30, 1998, respectively. The increases in all
periods reflect increased capitalized interest costs and growth in equity income
recognized by the Company on its investments in wireless partnerships, partially
offset by an increase in the minority interest in earnings of the Company's
wireless operations by others. The increases in capitalized interest costs in
all periods of 1998 reflect the acquisition of the PCS licenses, as interest
related to the license cost is capitalized for those markets not yet
operational.
Interest Expense
- ----------------
Interest expense increased $0.5 million or 2 percent, $2.0 million or 3
percent and $3.7 million or 3 percent for the three, six and twelve month
periods ended June 30, 1998, respectively. The increases in interest expense in
all periods reflect increases in both the average amount of borrowings
outstanding and weighted average borrowing rates applicable to the Company's
revolving credit agreement, partially offset by decreased interest on other
long-term debt due to a reduction in outstanding balances as a result of
scheduled maturity payments.
Income Taxes
- ------------
Income tax expense decreased $3.5 million or 3 percent, increased $9.6
million or 5 percent and increased $82.9 million or 34 percent for the three,
six and twelve month periods ended June 30, 1998, respectively. The changes in
income tax expense in all periods primarily reflect the tax-related impact of
the various non-recurring items previously discussed. Excluding the impact on
tax expense of these non-recurring items in each period, income tax expense
would have increased $1.3 million or 2 percent, $7.1 million or 6 percent and
$21.0 million or 9 percent in the three, six and twelve month periods ended June
30, 1998, respectively, consistent with the overall growth in the Company's
earnings from continuing operations before non-recurring items.
Average Common Shares Outstanding
- ---------------------------------
The average number of common shares outstanding decreased 1 percent in both
the three and six month periods ended June 30, 1998, and decreased 2 percent in
the twelve month period June 30, 1998. The decreases in all periods were
primarily due to the Company's repurchase of its common stock on the open
market, partially offset by additional shares issued in connection with the
acquisition of a wireline property in the State of Georgia and by additional
shares issued under the Company's stock option plans.
Merger Agreement
- ----------------
Effective July 1, 1998, ALLTEL completed its merger with 360
Communications Company ("360") under a definitive merger agreement entered into
on March 16, 1998. The stockholders of each company approved the merger at
special meetings held on June 23, 1998. 360 provides wireless voice and data
telecommunications services to more than 2.7 million customers in 15 states. 360
also markets residential long-distance and paging services in the states
in which it provides wireless services. The merged company has $8.9 billion
in assets, $12 billion in market capitalization, serves more than 5.6 million
communications customers in 22 states and operates more than 700 retail outlets.
The combined company employs more than 20,000 people worldwide and has more
than 1,000 information services clients in 48 countries.
12
<PAGE>
Under terms of the merger agreement, 360 became a wholly-owned
subsidiary of ALLTEL, and each outstanding share of 360 common stock was
converted into the right to receive .74 shares of ALLTEL common stock.
Accordingly, ALLTEL issued in aggregate 89.9 million shares to former
stockholders of 360. The merger qualified as a tax-free reorganization and has
been accounted for as a pooling of interests. Post-merger financial statements
reporting the combined operating results of ALLTEL and 360 will first be
presented as of and for the interim periods ended September 30, 1998 and 1997.
Annual and interim financial statements of ALLTEL for periods prior to the
merger will be restated to reflect the merger transaction. Supplemental
financial information for the interim periods ended June 30, 1998 and 1997 is
disclosed in Note 2 to the Unaudited Consolidated Financial Statements included
in Exhibit 19 to this Form 10-Q.
Other Financial Information
- ---------------------------
During the first six months of 1998, there were no material changes in the
market risks discussed in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997.
The Year 2000 compliance issue concerns the inability of computerized
information systems to properly recognize and process date sensitive information
as the year 2000 approaches. The Company has taken actions to understand the
nature and extent of the work required to make its systems, products and
infrastructure, in those situations in which ALLTEL is required to do so, Year
2000 compliant. ALLTEL has established a Year 2000 Program Office to coordinate
and monitor the Company's Year 2000 compliance efforts and has prepared and is
in the process of implementing a company-wide Year 2000 compliance plan. ALLTEL
continues to evaluate the estimated costs associated with these efforts based on
actual experience. While these efforts involve additional costs, the Company
believes, based on available information, that these costs will not have a
material adverse effect on its results of operations.
Recently Issued Accounting Pronouncements
- -----------------------------------------
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and for Hedging Activities", ("SFAS 133"). This Statement
establishes accounting and reporting standards requiring that every derivative
instrument be recorded on the balance sheet as either an asset or liability
measured at fair value. SFAS 133 requires that changes in a derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate and
assess the effectiveness of transactions that receive hedge accounting. SFAS 133
is effective for fiscal years beginning after June 15, 1999, and cannot be
applied retroactively. ALLTEL has not yet quantified the impacts of adopting
SFAS 133 on its financial statements; however, SFAS 133 could increase the
volatility of reported earnings and other comprehensive income once adopted.
Forward-Looking Statements
- --------------------------
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, Year 2000 compliance 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
13
<PAGE>
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 wireline 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.
14
<PAGE>
ALLTEL CORPORATION
FORM 10-Q
Part II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
- ------ ---------------------------------------------------
The Company's 1998 Annual Meeting of Stockholders was held on April 23,
1998. At the meeting, the following items were submitted to a vote of
stockholders:
(1) The election of four directors, constituting the class of the
Company's Board of Directors, who will serve a three-year term
expiring at the 2001 Annual Meeting of Stockholders:
Nominee Votes For Votes Withheld
------- --------- --------------
Michael D. Andreas 158,683,891 1,780,586
Lawrence L. Gellerstedt III 159,228,729 1,235,748
Emon A. Mahoney, Jr. 159,273,879 1,190,598
Ronald Townsend 159,200,670 1,263,807
(2) A stockholder proposal to amend ALLTEL's Shareholders Rights
Plan was not adopted with 56,922,321 votes for, 85,505,042 votes
against and 2,691,120 abstentions. Broker non-votes related to
this proposal totaled 15,345,994.
The Company held a Special Meeting of Stockholders on June 23, 1998. At the
meeting, the following items were submitted to a vote of stockholders:
(1) Proposal to approve the issuance of ALLTEL common stock, par
value $1.00 per share, pursuant to an Agreement and Plan of
Merger dated March 16, 1998, by and among ALLTEL, Pinnacle
Merger Sub, Inc., a Delaware corporation and a wholly-owned
subsidiary of ALLTEL, and 360 Communications Company, a Delaware
corporation, and the transactions contemplated thereby. The
proposal was approved with 146,166,604 votes for, 1,427,797
votes against and 691,991 abstentions. Broker non-votes related
to this proposal totaled 15,749,572.
(2) Proposal to amend the restated Certificate of Incorporation of
ALLTEL to increase from 500,000,000 to 1,000,000,000 the number
of shares of ALLTEL common stock authorized to be issued from
time to time by the Company. The proposal was approved with
155,979,065 votes for, 7,343,141 votes against and 713,758
abstentions.
(3) Proposal to approve the ALLTEL 1998 Equity Incentive Plan. The
proposal was approved with 120,248,214 votes for, 42,222,701
votes against and 1,562,246 abstentions.
15
<PAGE>
ALLTEL CORPORATION
FORM 10-Q
Part II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) See the exhibits specified on the Index of Exhibits located at
Page 18.
(b) Reports on Form 8-K:
Current Report on Form 8-K dated April 21, 1998, reporting under
Item 5, Other Events, the Company's Press Release announcing its
first quarter results from operations.
Current Report on Form 8-K dated June 23, 1998, reporting under
Item 5, Other Events, the Company's Press Release announcing
that the stockholders of ALLTEL and 360 Communications Company
("360") had approved the merger of the two companies, and
that the Federal Communications Commission also had approved
the merger transaction.
Current Report on Form 8-K dated June 30, 1998, reporting under
Item 2, Acquisition or Disposition of Assets, the Company's
Press Release announcing that ALLTEL and 360 had completed
their merger effective July 1, 1998. The required historical
financial statements of 360 required pursuant to Rule 3-05 of
Regulation S-X and the pro forma financial information required
pursuant to Article 11 of Regulation S-X will be filed by
amendment not later than 60 days after the date this Form 8-K
was required to be filed.
No other reports on Form 8-K have been filed during the quarter
for which this report is filed.
16
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALLTEL CORPORATION
----------------------
(Registrant)
/s/ Dennis J. Ferra
----------------------
Dennis J. Ferra
Senior Vice President and
Chief Administrative Officer
(Principal Financial Officer)
August 14, 1998
17
<PAGE>
ALLTEL CORPORATION
FORM 10-Q
INDEX OF EXHIBITS
Form 10-Q Sequential
Exhibit No. Description Page No.
- ----------- ----------- ----------
(10)(f)(5) ALLTEL Corporation 1998 Management Deferred 27 - 49
Compensation Plan, effective June 23, 1998
(10)(f)(6) ALLTEL Corporation 1998 Directors' Deferred 50 - 69
Compensation Plan, effective June 23, 1998
(19) Interim Report to Stockholders and 19 - 26
Notes to Consolidated Financial Statements
for the periods ended June 30, 1998
(27) Financial Data Schedule 70
for the three months ended June 30, 1998
18
EXHIBIT 19
<TABLE>
<CAPTION>
HIGHLIGHTS (UNAUDITED)
Three Months Ended June 30, Six Months Ended June 30, Twelve Months Ended June 30,
--------------------------- ------------------------- ----------------------------
Dollars in thousands % Increase % Increase % Increase
(except per share amounts) 1998 1997 (Decrease) 1998 1997 (Decrease) 1998 1997 (Decrease)
- -------------------------- ---- ---- ---------- ---- ---- ---------- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FROM CURRENT BUSINESSES1:
Revenues and sales:
Wireline $341,067 $311,294 10 $ 675,514 $ 612,470 10 $1,331,926 $1,201,902 11
Wireless 154,877 137,711 12 295,506 261,828 13 576,404 509,969 13
-------- -------- ---------- ---------- ---------- ----------
Total communications 495,944 449,005 10 971,020 874,298 11 1,908,330 1,711,871 11
Information services 297,191 247,613 20 564,052 464,777 21 1,072,648 900,682 19
Product distribution 111,277 81,097 37 193,050 157,157 23 352,748 299,772 18
Other operations 30,080 27,848 8 53,332 62,106 (14) 110,106 125,499 (12)
-------- -------- ---------- ---------- ---------- ----------
Total revenues and sales $934,492 $805,563 16 $1,781,454 $1,558,338 14 $3,443,832 $3,037,824 13
======== ======== ========== ========== ========== ==========
Operating income:
Wireline $109,773 $108,638 1 $ 225,428 $ 214,539 5 $ 457,339 $ 414,967 10
Wireless 50,171 44,399 13 91,181 84,087 8 186,924 164,017 14
Other (4,609) - - (5,556) - - (6,985) - -
-------- -------- ---------- ---------- ---------- ----------
Total communications 155,335 153,037 2 311,053 298,626 4 637,278 578,984 10
Information services 39,404 35,739 10 76,267 69,403 10 152,086 139,923 9
Product distribution 4,874 3,879 26 8,455 7,157 18 13,782 13,914 (1)
Other operations 2,457 1,783 38 4,215 4,711 (11) 8,292 10,444 (21)
Corporate expenses (5,568) (5,739) (3) (11,941) (11,112) 7 (29,749) (24,860) 20
-------- -------- ---------- ---------- ---------- ----------
Total operating income $196,502 $188,699 4 $ 388,049 $ 368,785 5 $ 781,689 $ 718,405 9
======== ======== ========== ========== ========== ==========
Net income $106,709 $ 97,348 10 $ 207,987 $ 189,178 10 $ 417,706 $ 372,064 12
Basic earning per share $.58 $.52 12 $1.13 $1.01 12 $2.26 $1.97 15
AS REPORTED:
Revenues and sales $934,492 $816,880 14 $1,781,454 $1,601,185 11 $3,443,832 $3,214,884 7
Operating income $196,502 $172,159 14 $ 388,049 $ 353,384 10 $ 781,689 $ 592,954 32
Net income $196,898 $173,890 13 $ 320,449 $ 275,598 16 $ 552,737 $ 391,354 41
Basic earnings per share $1.07 $.93 15 $1.74 $1.47 18 $2.99 $2.08 44
Weighted average common shares 184,342,000 186,708,000 (1) 184,208,000 186,775,000 (1) 184,775,000 187,944,000 (2)
Current annual dividend rate
per common share $1.16 $1.10 5
Capital expenditures $156,436 $102,954 52 $ 256,782 $ 248,305 3 $ 554,050 $ 489,095 13
Total assets $5,876,855 $5,411,387 9
Wireline access lines 1,847,007 1,731,272 7
Wireless customers 1,009,556 890,017 13
Long-distance customers 338,306 188,868 79
<FN>
1From current businesses excludes the sold healthcare, wire and cable operations, the provision to reduce carrying
value of certain assets, and gain on disposal of assets.
</FN>
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Six Months Twelve Months
Ended June 30, Ended June 30, Ended June 30,
-------------- -------------- --------------
(Dollars in thousands, except per share amounts) 1998 1997 1998 1997 1998 1997
- ----------------------------------------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
REVENUES AND SALES:
Service revenues $767,707 $673,957 $1,485,641 $1,299,771 $2,886,777 $2,593,010
Product sales 166,785 142,923 295,813 301,414 557,055 621,874
-------- -------- ---------- ---------- ---------- ----------
Total revenues and sales 934,492 816,880 1,781,454 1,601,185 3,443,832 3,214,884
-------- -------- ---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Operations 503,554 425,933 949,746 818,215 1,818,270 1,640,217
Cost of products sold 113,364 93,101 197,444 197,171 362,437 414,441
Depreciation and amortization 121,072 108,813 246,215 215,541 481,436 430,118
Provision to reduce carrying value of
certain assets - 16,874 - 16,874 - 137,154
-------- -------- ---------- ---------- ---------- ----------
Total costs and expenses 737,990 644,721 1,393,405 1,247,801 2,662,143 2,621,930
-------- -------- ---------- ---------- ---------- ----------
OPERATING INCOME 196,502 172,159 388,049 353,384 781,689 592,954
Other income, net 4,139 590 9,280 17 14,499 2,165
Interest expense (32,417) (31,884) (65,916) (63,886) (132,211) (128,519)
Gain on disposal of assets and other 148,159 155,993 184,743 172,209 219,156 172,209
-------- -------- ---------- ---------- ---------- ----------
Income before income taxes 316,383 296,858 516,156 461,724 883,133 638,809
Income taxes 119,485 122,968 195,707 186,126 330,396 247,455
-------- -------- ---------- ---------- ---------- ----------
Net income 196,898 173,890 320,449 275,598 552,737 391,354
Preferred dividends 231 256 471 514 965 1,037
-------- -------- ---------- ---------- ---------- ----------
Net income applicable to common shares $196,667 $173,634 $ 319,978 $ 275,084 $ 551,772 $ 390,317
======== ======== ========== ========== ========== ==========
EARNINGS PER SHARE:
Basic $1.07 $.93 $1.74 $1.47 $2.99 $2.08
Diluted $1.06 $.92 $1.72 $1.46 $2.96 $2.06
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Twelve Months
Ended June 30, Ended June 30,
-------------- --------------
(Dollars in thousands)
- ----------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET CASH PROVIDED FROM OPERATIONS $397,907 $306,349 $889,783 $746,740
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (256,782) (248,305) (554,050) (489,095)
Purchase of property, net of cash acquired - (40,447) (10,186) (40,447)
Additions to capitalized software development costs (45,878) (32,822) (87,281) (80,615)
Additions to other intangible assets - (146,526) - (146,526)
Additions to investments (13,733) (3,503) (53,597) (12,035)
Proceeds from the sale of/return on investments 222,001 189,330 232,420 195,544
Proceeds from the sale of assets - 151,958 48,640 151,958
Other, net (7,519) (31,922) (62,304) (85,035)
-------- -------- -------- --------
Net cash used in investing activities (101,911) (162,237) (486,358) (506,251)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends on preferred and common stock (107,274) (103,234) (210,352) (202,310)
Reductions in long-term debt (179,929) (18,935) (64,491) (43,098)
Purchase of common stock - (38,262) (137,349) (113,866)
Preferred stock redemptions and purchases (518) (493) (898) (511)
Long-term debt issued 113 25,070 113 111,089
Common stock issued 12,122 6,344 17,798 6,243
-------- -------- -------- --------
Net cash used in financing activities (275,486) (129,510) (395,179) (242,453)
-------- -------- -------- --------
Increase (decrease) in cash and short-term investments 20,510 14,602 8,246 (1,964)
CASH AND SHORT-TERM INVESTMENTS:
Beginning of period 16,212 13,874 28,476 30,440
-------- -------- -------- --------
End of period $ 36,722 $ 28,476 $ 36,722 $ 28,476
======== ======== ======== ========
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30, Dec. 31, June 30,
ASSETS (Dollars in thousands) 1998 1997 1997
- ----------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and short-term investments $ 36,722 $ 16,212 $ 28,476
Accounts receivable (less allowance for
doubtful accounts of $20,568, $18,562
and $21,363, respectively) 567,208 560,928 513,071
Materials and supplies 19,425 14,237 16,883
Inventories 46,601 51,277 46,687
Prepaid expenses 32,150 23,190 41,251
---------- ---------- ----------
Total current assets 702,106 665,844 646,368
---------- ---------- ----------
Investments 907,939 775,647 764,948
Goodwill and other intangibles 606,196 606,484 589,203
PROPERTY, PLANT AND EQUIPMENT:
Wireline 4,168,128 4,068,502 3,841,492
Wireless 747,175 692,490 630,020
Information services 591,004 539,743 504,131
Other 11,589 11,008 12,558
Under construction 202,354 218,951 257,410
---------- ---------- ----------
Total property, plant and equipment 5,720,250 5,530,694 5,245,611
Less accumulated depreciation 2,503,608 2,340,242 2,163,254
---------- ---------- ----------
Net property, plant and equipment 3,216,642 3,190,452 3,082,357
---------- ---------- ----------
Other assets 443,972 395,018 328,511
---------- ---------- ----------
TOTAL ASSETS $5,876,855 $5,633,445 $5,411,387
========== ========== ==========
June 30, Dec. 31, June 30,
LIABILITIES AND SHAREHOLDERS' EQUITY 1998 1997 1997
---------- ---------- ----------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 47,950 $ 48,028 $ 39,754
Accounts payable 210,093 237,865 195,030
Advance payments and customer deposits 102,637 84,215 71,019
Accrued taxes 134,048 74,681 59,273
Accrued dividends 55,491 55,012 52,885
Other current liabilities 112,303 137,480 120,712
---------- ---------- ----------
Total current liabilities 662,522 637,281 538,673
---------- ---------- ----------
Long-term debt 1,694,434 1,874,172 1,767,008
Deferred income taxes 755,215 665,473 647,485
Other liabilities 245,364 242,388 230,120
Preferred stock, redeemable 5,128 5,625 5,974
SHAREHOLDERS' EQUITY:
Preferred stock 9,134 9,155 9,186
Common stock 184,355 183,673 186,870
Additional capital 164,376 152,936 266,751
Unrealized holding gain on investments 381,556 300,671 324,334
Retained earnings 1,774,771 1,562,071 1,434,986
---------- ---------- ----------
Total shareholders' equity 2,514,192 2,208,506 2,222,127
---------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $5,876,855 $5,633,445 $5,411,387
========== ========== ==========
</TABLE>
22
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Financial Statement Presentation:
The consolidated financial statements at June 30, 1998 and 1997 and for
the three, six and twelve month periods then ended are unaudited and
reflect all adjustments (consisting only of normal recurring adjustments)
which are, in the opinion of management, necessary for a fair presentation
of the financial position and operating results for the interim periods.
Certain prior year amounts have been reclassified to conform with the 1998
financial statement presentation.
2. Subsequent Event-Merger Agreement:
On July 1, 1998, ALLTEL completed its merger with 360 Communications
Company ("360") under a definitive merger agreement entered into on
March 16, 1998. The stockholders of each company approved the merger at
special meetings held on June 23, 1998. Under terms of the merger
agreement, 360 became a wholly-owned subsidiary of ALLTEL, and each
outstanding share of 360 common stock was converted into the right to
receive .74 shares of ALLTEL common stock. Accordingly, ALLTEL issued
in aggregate 89.8 million shares to former stockholders of 360. The merger
qualified as a tax-free reorganization and has been accounted for as a
pooling of interests. Post-merger financial statements combining the
results of ALLTEL and 360 will first be presented as of and for the
interim periods ended September 30, 1998 and 1997. Annual and interim
financial statements of ALLTEL for periods prior to the merger will be
restated to reflect the merger transaction. The following supplemental
financial information presents the combined operating results of ALLTEL
and 360 for the interim periods ended June 30, 1998 and 1997. The combined
results include certain eliminations and reclassification adjustments to
conform the accounting and financial reporting policies of ALLTEL and 360:
<TABLE>
Three Months Ended Six Months Ended Twelve Months Ended
(In thousands, except per share amounts) June 30, June 30, June 30,
---------------------------------------- ------------------- ------------------ --------------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues and sales:
ALLTEL $ 934,492 $ 816,880 $1,781,454 $1,601,185 $3,443,832 $3,214,884
360 398,613 340,262 753,448 647,108 1,453,512 1,229,112
Eliminations and reclassifications (32,807) (17,296) (52,032) (35,074) (91,007) (66,464)
---------- ---------- ---------- ---------- ---------- ----------
Combined $1,300,298 $1,139,846 $2,482,870 $2,213,219 $4,806,337 $4,377,532
========== ========== ========== ========== ========== ==========
Net income:
ALLTEL $ 196,898 $ 173,890 $ 320,449 $ 275,598 $ 552,737 $ 391,354
360 37,119 21,807 81,239 31,252 131,482 59,508
Eliminations and reclassifications - - - - - -
---------- ---------- ---------- ---------- ---------- ----------
Combined $ 234,017 $ 195,697 $ 401,688 $ 306,850 $ 684,219 $ 450,862
========== ========== ========== ========== ========== ==========
Combined earnings per share:
Basic $.85 $.70 $1.46 $1.10 $2.49 $1.62
Diluted $.84 $.70 $1.45 $1.10 $2.47 $1.61
</TABLE>
3. Comprehensive Income:
Effective January 1, 1998, ALLTEL adopted Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS
130"). Annual financial statements of ALLTEL for prior periods will be
reclassified to conform to SFAS 130's presentation requirements.
Comprehensive income for the three, six and twelve month periods ended
June 30, 1998 and 1997 was as follows:
<TABLE>
Three Months Ended Six Months Ended Twelve Months Ended
(Dollars in thousands) June 30, June 30, June 30,
---------------------- ------------------- ------------------ -------------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net income $196,898 $173,890 $320,449 $275,598 $552,737 $391,354
-------- -------- -------- -------- -------- --------
Other comprehensive income (loss):
Unrealized holding gains on
investments arising during the period 77,596 207,590 319,263 106,171 282,541 62,498
Reclassification adjustments for
gains included in net income (148,159) (155,993) (184,743) (155,993) (184,743) (155,993)
-------- -------- -------- -------- -------- --------
Other comprehensive income (loss)
before taxes (70,563) 51,597 134,520 (49,822) 97,798 (93,495)
Income tax expense (benefit) (26,621) 13,239 53,635 (22,289) 40,576 (50,587)
-------- -------- -------- -------- -------- --------
Other comprehensive income (loss) (43,942) 38,358 80,885 (27,533) 57,222 (42,908)
-------- -------- -------- -------- -------- --------
Comprehensive income $152,956 $212,248 $401,334 $248,065 $609,959 $348,446
======== ======== ======== ======== ======== ========
</TABLE>
23
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
4. Gain on Disposal of Assets and Other:
During the second quarter of 1998, the Company recorded a pretax gain of
$148.2 million from the sale of a portion of its investment in WorldCom,
Inc. common stock. Proceeds from this sale amounted to $162.6 million.
This transaction increased net income $90.2 million or $.49 per share.
During the first quarter of 1998, the Company recorded a pretax gain of
$36.6 million primarily from the sale of a portion of its investment in
WorldCom, Inc. common stock. Proceeds from the sale of stock amounted to
$40.7 million. This transaction resulted in an increase of $22.3 million
in net income and $.12 in earnings per share.
5. Earnings per Share:
A reconciliation of the net income and number of shares used in computing
basic and diluted earnings per share for the three, six and twelve month
periods ended June 30, 1998 and 1997 was as follows:
<TABLE>
Three Months Ended Six Months Ended Twelve Months Ended
(In thousands, except per share amounts) June 30, June 30, June 30,
---------------------------------------- ------------------- ----------------- -------------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per share:
Net income applicable to common shares $196,667 $173,634 $319,978 $275,084 $551,772 $390,317
Weighted average common shares
outstanding for the period 184,342 186,708 184,208 186,775 184,775 187,944
-------- -------- -------- -------- -------- --------
Basic earnings per share $1.07 $.93 $1.74 $1.47 $2.99 $2.08
===== ==== ===== ===== ===== =====
Diluted earnings per share:
Net income applicable to common shares $196,667 $173,634 $319,978 $275,084 $551,772 $390,317
Adjustments for convertible securities:
Preferred stocks 38 52 84 106 184 214
-------- -------- -------- -------- -------- --------
Net income applicable to common shares
assuming conversion of above securities $196,705 $173,686 $320,062 $275,190 $551,956 $390,531
-------- -------- -------- -------- -------- --------
Weighted average common shares
outstanding for the period 184,342 186,708 184,208 186,775 184,775 187,944
Increase in shares which would result from:
Exercise of stock options 1,638 1,384 1,741 1,081 1,434 1,021
Conversion of convertible preferred stocks 470 538 473 541 490 547
-------- -------- ------- ------- ------- -------
Weighted average common shares
assuming conversion of above securities 186,450 188,630 186,422 188,397 186,699 189,512
-------- -------- ------- ------- ------- -------
Diluted earnings per share $1.06 $.92 $1.72 $1.46 $2.96 $2.06
===== ==== ===== ===== ===== =====
</TABLE>
6. Business Segment Information:
Operating results for each of the Company's business segments for the
three, six and twelve month periods ended June 30, 1998 and 1997 were as
follows:
<TABLE>
Three Months Ended Six Months Ended Twelve Months Ended
(In thousands) June 30, June 30, June 30,
-------------- -------------------- ------------------- ---------------------
1998 1997 1998 1997 1998 1997
---- ---- ---- --- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues and Sales:
Wireline $341,067 $311,294 $ 675,514 $ 612,470 $1,331,926 $1,201,902
Wireless 154,877 137,711 295,506 261,828 576,404 509,969
-------- -------- ---------- ---------- ---------- ----------
Total communications 495,944 449,005 971,020 874,298 1,908,330 1,711,871
Information services 297,191 247,613 564,052 464,777 1,072,648 963,690
Product distribution 111,277 92,414 193,050 200,004 352,748 413,824
Other operations 30,080 27,848 53,332 62,106 110,106 125,499
-------- -------- ---------- ---------- ---------- ----------
Total $934,492 $816,880 $1,781,454 $1,601,185 $3,443,832 $3,214,884
======== ======== ========== ========== ========== ==========
Operating Income:
Wireline $109,773 $108,638 $ 225,428 $ 214,539 $ 457,339 $ 414,967
Wireless 50,171 44,399 91,181 84,087 186,924 164,017
Other (4,609) - (5,556) - (6,985) -
-------- -------- ---------- ---------- ---------- ----------
Total communications 155,335 153,037 311,053 298,626 637,278 578,984
Information services 39,404 35,739 76,267 69,403 152,086 71,391
Product distribution 4,874 4,213 8,455 8,630 13,782 19,169
Other operations 2,457 1,783 4,215 4,711 8,292 10,444
Corporate expenses (5,568) (22,613) (11,941) (27,986) (29,749) (87,034)
-------- -------- ---------- ---------- ---------- ----------
Total $196,502 $172,159 $ 388,049 $ 353,384 $ 781,689 $ 592,954
======== ======== ========== ========== ========== ==========
</TABLE>
24
<PAGE>
TO ALLTEL STOCKHOLDERS:
ALLTEL's second quarter 1998 financial results from current businesses produced
quarterly revenues and earnings per share growth of 16 percent and 12 percent,
respectively, to $934,492,000 and 58 cents per share.
These results exclude the operations of 360 Communications Company, which
merged with ALLTEL on July 1.
Highlights from current businesses in the second quarter include:
o All major business units produced double-digit growth in revenues.
o Wireless customer base surpassed the 1 million customer level.
o Wireless average revenue per customer increased 6 percent from the
first quarter.
o Wireline access line growth exceeded 6 percent for the third
consecutive quarter.
o ALLTEL introduced a single-bill, bundled service offering
including wireless, Internet and long-distance in its first
PCS market, Jacksonville, Fla.
o Long-distance customer base grew to 338,000 customers, a
79 percent increase from last year.
o Operating income from information services grew at a double-digit
rate, reflecting continued double-digit revenue growth.
I am very pleased with ALLTEL's double-digit earnings growth in the
quarter, and I am particularly pleased we could do this while working to merge
ALLTEL and 360 Communications. Our integration teams continue work on the
details of combining the companies, and we are more convinced than ever that the
transition will be a smooth one, that we will realize the cost savings estimated
earlier, and that the company's future results will show the benefits of the
merger.
During the quarter, ALLTEL's wireline business experienced double-digit
increases in revenues fueled by the strong demographics of our largely rural
service areas. Additionally, the success of new product offerings -- including
long-distance, Internet access and competitive local exchange carrier (CLEC)
services --was a positive factor in the quarter.
The results of our CLEC strategy in Little Rock are particularly
encouraging. With the success of this offering, we have achieved our goal of
becoming the first full-service communications provider in this market, now
offering CLEC, long-distance, wireless and paging and Internet access. In
addition, we are now actively selling CLEC services to a second market -
Charlotte, N.C. - an area where we have a number of competitive advantages
including a switch and fiber loop, an effective network of wireless distribution
outlets, and strong brand awareness.
Also during the quarter, our integrated communications structure enabled us
to deliver a bundled service offering in Jacksonville, Fla. Our competitors in
that market simply cannot match the breadth of our service array. Results to
date in that market clearly demonstrate the advantages a full-service provider
has over a single- or limited-product provider.
Wireless operations produced double-digit growth in revenues, operating
income and customer growth, with customer count breaking through the 1 million
mark. In addition, average revenue per customer increased 6 percent from the
first quarter.
Information services continued to generate double-digit revenue growth
coming from new and existing customers, while operating income grew at a
double-digit rate in the second quarter.
ALLTEL and 360 Communications Complete Merger
On July 1, ALLTEL and 360 Communications completed their merger, creating a
formidable new competitor in the communications industry. Together, our two
companies have tremendous local presence. In addition to our numerous
distribution outlets, we have a growing facilities-based network, as well as
existing relationships with a customer segment very willing to buy
communications products.
These three factors together distinguish us from our competitors and
provide a platform for continuing to grow the value of the combined company.
Second quarter pro forma results from current businesses for the combined
company indicated 16 percent and 14 percent growth in revenues and operating
income, respectively, and 21 percent growth in basic earnings per share.
The merged company has more than $4.9 billion in annual revenues, $8.9
billion in assets, $12 billion in market capitalization and serves more than 5.6
million communications customers in 22 states and operates more than 700 retail
outlets. The combined company employs more than 20,000 people worldwide.
The 360 Communications name will change to ALLTEL in mid-September.
25
<PAGE>
Four named to ALLTEL Board
In conjunction with the merger of ALLTEL and 360 Communications, ALLTEL has
expanded the membership of its board of directors from 11 to 15. Three members
of 360's board of directors have been appointed to serve on ALLTEL's board. They
are Dennis Foster, ALLTEL vice chairman; Michael Hooker, chancellor of the
University of North Carolina; and Frank E. Reed, former 360 chairman. Also
joining the expanded ALLTEL board is Charles H. Goodman, vice president of Henry
Crown and Co. of Chicago.
Poland's largest bank signs agreement with ALLTEL
In June, ALLTEL signed a long-term information technology (IT) agreement with
Grupa Pekao SA, Poland's largest bank in terms of assets. Pekao is headquartered
in Warsaw and provides commercial and retail banking services. At year-end 1997,
Pekao had $13.4 billion in assets and 564 branches.
The contract is ALLTEL's first in Poland and increases to 48 the number of
countries in which ALLTEL provides services. Under terms of the agreement,
ALLTEL will implement its integrated financial software system for Pekao and
provide a wide range of professional services, including technical strategic
planning, application software customization and implementation, and integration
of non-ALLTEL systems with ALLTEL products.
Board Declares Dividends
ALLTEL's board of directors declared regular quarterly dividends on ALLTEL's
common stock. The 29 cent dividend is payable October 3, 1998 to stockholders of
record as of September 8, 1998.
Regular quarterly dividends were also declared on all series of the
Company's preferred stock. Preferred dividends are payable September 15, 1998 to
stockholders of record as of August 21, 1998.
/s/Joe T. Ford
Joe T. Ford
Chairman and Chief Executive Officer
July 23, 1998
26
ALLTEL CORPORATION
1998 MANAGEMENT DEFERRED COMPENSATION PLAN
27
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS 1
1.1. Beneficiary 1
1.2. Board 1
1.3. CEO 1
1.4. Change in Control 1
1.5. Code 2
1.6. Compensation 2
1.7. Compensation Committee 2
1.8. Continuing Directors 3
1.9. Controlled Group 3
1.10. Corporation 3
1.11. Deferral Year 3
1.12. Deferred Compensation Account 3
1.13. Early Retirement Date 4
1.14. Eligible Employee 4
1.15. Employee 4
1.16. ERISA 4
1.17. Incentive Compensation 4
1.18. Interest Rate 4
1.19. Long-Term Incentive Compensation 5
1.20. Normal Retirement Date 5
1.21. Participant 5
1.22. Person 5
1.23. Plan 5
1.24. Retirement 5
1.25. Salary 6
1.26. Subsidiary 6
1.27. Vesting Years of Service 6
1.28. Year 6
ARTICLE II DEFERRAL 7
2.1. Eligibility 7
2.2. Amount Deferred 8
2.3. Deferral Election 8
2.4. Deferral Period 9
ARTICLE III ACCOUNTS 10
3.1. Deferred Compensation Accounts 10
3.2. Account Adjustment (Other Than For
Hypothetical Interest) 10
3.3. Hypothetical Interest Credits 11
ARTICLE IV PAYMENT 12
-i-
28
<PAGE>
4.1. Payment of Deferred Compensation Accounts 12
4.2. Retirement 12
4.3. Termination of Employment Other Than By Retirement 12
4.4. Change in Control 13
4.5. Death of Participant 13
4.6. Hardship 14
4.7. Nature of Payment Obligation 15
4.8. Legal Incompetency 16
ARTICLE V ADMINISTRATION 16
5.1. Plan Administration 16
5.2. Expenses 17
5.3. Records 17
5.4. Communications 17
ARTICLE VI MISCELLANEOUS 18
6.1. Amendments 18
6.2. No Employment or Other Rights 19
6.3. Severability 19
6.4. Nonalienation 19
6.5. Limitation of Liability 20
6.6. Construction and Governing Law 20
-ii-
29
<PAGE>
ALLTEL CORPORATION
1998 MANAGEMENT DEFERRED COMPENSATION PLAN
ALLTEL Corporation (the "Corporation"), hereby establishes, effective
as of June 23, 1998, the deferred compensation plan set forth herein, which
shall be known as the ALLTEL Corporation 1998 Management Deferred Compensation
Plan (the "Plan"). The purpose of the Plan is to provide to certain key
management employees who are selected to participate in the Plan the option of
deferring a portion of their compensation to be received from the Corporation or
other member of the Controlled Group (as hereinafter defined).
ARTICLE I
DEFINITIONS
For the purposes hereof, the following words and phrases shall have the
meanings indicated:
1.1. "Beneficiary" shall mean the beneficiary(ies) determined in
accordance with the Plan to receive payment of the Participant's Deferred
Compensation Account(s) in the event of the death of the Participant prior to
payment to him of his Deferred Compensation Account(s).
1.2. "Board" shall mean the Board of Directors of the Corporation.
1.3. "CEO" shall mean the Chief Executive Officer of the Corporation.
1.4. A "Change in Control" shall mean, if subsequent to June 23, 1998:
(a) Any "person," as defined in Section 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), other than the Corporation, any of its
subsidiaries, or any employee benefit plan maintained by
the Corporation or any of its subsidiaries, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of (i) 15% or more, but no greater than 50%, of
the outstanding voting capital stock of the Corporation,
unless prior thereto, the Continuing Directors approve the
transaction that results in the person becoming the beneficial
owner of 15% or more, but no greater than 50%, of the
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<PAGE>
outstanding voting capital stock of the Corporation or (ii)
more than 50% of the outstanding voting capital stock of the
Corporation, regardless whether the transaction or event by
which the foregoing 50% level is exceeded is approved by the
Continuing Directors; or
(b) At any time Continuing Directors no longer
constitute a majority of the directors of the Corporation; or
(c) A record date is fixed for determining
stockholders entitled to vote upon (i) a merger or
consolidation of the Corporation, statutory share exchange, or
other similar transaction with another corporation, partnership,
or other entity or enterprise in which either the Corporation is
not the surviving or continuing corporation or shares of common
stock of the Corporation are to be converted into or exchanged
for cash, securities other than common stock of the Corporation,
or other property, (ii) a sale or disposition of all or
substantially all of the assets of the Corporation, or (iii) the
dissolution of the Corporation; or
(d) The Corporation enters into an agreement with any
Person, the consummation of which would result in the
occurrence of an event described in clause (a), (b), or (c)
above of this Section 1.4.
1.5. "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
1.6. "Compensation" of an Eligible Employee shall mean Incentive
Compensation, Long-Term Incentive Compensation, and Salary that, but for the
provisions of the Plan, would be paid in cash (or by check) to an Eligible
Employee by the Corporation or other member of the Controlled Group, excluding,
however, any amount that, but for the provisions of the Plan, would be paid to a
person who on the date of payment is no longer an Employee, except Salary for
the pay period in which the Employee's status as an Employee terminates.
1.7. "Compensation Committee" shall mean the Compensation
Committee of the Board, or if at any time there is no Compensation Committee of
the Board, the Board.
1.8. "Continuing Directors" shall mean that directors who were
directors of the Corporation at the beginning of the 24-month period ending on
-2-
31
<PAGE>
the date the determination is made or whose election, or nomination for election
by the Corporation's stockholders, was approved by at least a majority of the
directors who are in office at the time of the election or nomination and who
either (i) were directors at the beginning of the period, or (ii) were elected,
or nominated for election, by at least a majority of the directors who were in
office at the time of the election or nomination and were directors at the
beginning of the period.
1.9. "Controlled Group" shall mean the Corporation and any and all
other corporations, trades and/or businesses or organizations, the employees of
which together with the employees of the Corporation are, pursuant to the
applicable provisions of Section 414 of the Internal Revenue Code of 1986 as in
effect on January 1, 1994, treated as if they were employed by a single
employer, but with respect only to periods during which the controlled group
status described in Section 414 of the Internal Revenue Code of 1986 as in
effect on January 1, 1994 exists.
1.10. "Corporation" shall mean ALLTEL Corporation, a Delaware
corporation, and any successor to its business or assets, by operation of law or
otherwise.
1.11. "Deferral Year" shall mean, with respect to a Participant, a Year
in which compensation is deferred in accordance with the Plan.
1.12. "Deferred Compensation Account" shall mean a bookkeeping account
on which the amount of Compensation that is deferred by a Participant under the
Plan and any adjustments thereto in accordance with the Plan shall be recorded.
A separate Deferred Compensation Account shall be established for each Deferral
Year.
1.13. "Early Retirement Date" shall mean the date on which the earlier
of the following has occurred with respect to the Participant: (1) the
Participant is alive, the Participant is an employee of the Controlled Group,
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<PAGE>
the Participant has 20 or more Vesting Years of Service, and the last day of the
calendar month in which the Participant's fifty-fifth (55th) birthday occurs has
ended; or (2) the Participant is alive, the Participant is an employee of the
Controlled Group, the Participant has 15 or more Vesting Years of Service, and
the last day of the calendar month in which the Participant's sixtieth (60th)
birthday occurs has ended.
1.14. "Eligible Employee" shall mean an Employee who is an Eligible
Employee for a Year as determined in accordance with Section 2.1.
1.15. "Employee" shall mean any person who is a salaried employee of
the Corporation or other member of the Controlled Group.
1.16. "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
1.17. "Incentive Compensation" shall mean the gross amount payable in
cash (or by check) under the ALLTEL Corporation Performance Incentive
Compensation Plan, as amended from time to time, during any Year beginning after
December 31, 1998 to a person who on the date of payment is an Eligible
Employee.
1.18. "Interest Rate" shall, except as otherwise provided in Section
3.3, mean a percentage equal to the "Prime Rate" as published in the first issue
(in which "Prime Rate" is published) of the Wall Street Journal during each Year
beginning after December 31, 1998, plus two hundred (200) basis points.
-4-
33
<PAGE>
1.19. "Long-Term Incentive Compensation" shall mean the gross amount
payable in cash (or by check) under the ALLTEL Corporation Long-Term Performance
Incentive Compensation Plan, as amended from time to time, during any Year
beginning after December 31, 1998 to a person who on the date of payment is an
Eligible Employee.
1.20. "Normal Retirement Date" means the date on which the following
have occurred with respect to the Participant: the Participant is alive, the
Participant is an employee of the Controlled Group, and the last day of the
calendar month in which the Participant's sixty-fifth (65th) birthday occurs has
ended.
1.21. "Participant" shall mean an Eligible Employee or former Eligible
Employee who has deferred payment of any of his compensation in accordance with
the Plan and who has not received full payment of the balance(s) of his Deferred
Compensation Account(s).
1.22. "Person" shall have the meaning given in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended from time to time, as modified and
used in Sections 13(d) and 14(d) thereof; except that, a Person shall not
include (a) the Corporation or any Subsidiary, (b) a trustee or other fiduciary
holding securities under an employee benefit plan of the Corporation or any
Subsidiary, or (c) an underwriter temporarily holding securities pursuant to an
offering of such securities.
1.23. "Plan" shall mean the deferred compensation plan set forth
herein, together with all amendments hereto, which shall be called the "ALLTEL
Corporation 1998 Management Deferred Compensation Plan".
1.24. "Retirement" shall mean that the Participant is alive and is no
longer an employee of any member of the Controlled Group on a date occurring
after the Participant's Normal Retirement Date or after the Participant's Early
Retirement Date.
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<PAGE>
1.25. "Salary" shall mean the gross base salary of an Eligible Employee
payable in cash (or by check) by the Corporation or other member of the
Controlled Group during any Year beginning after December 31, 1998.
1.26. "Subsidiary" shall mean any corporation or other entity or
enterprise, whether incorporated or unincorporated, of which at least a majority
of the securities or other interests having by their terms ordinary voting power
to elect a majority of the board of directors or others serving similar
functions with respect to such corporation or other entity or enterprise is
owned by the Corporation or other entity or enterprise of which the Corporation
directly or indirectly owns securities or other interests having all the voting
power.
1.27. "Vesting Years of Service" shall mean, with respect to a
Participant, (a) for periods prior to January 1, 1989, each "Vesting Year of
Service" with which he was credited on December 31, 1988, if any, under the
ALLTEL Corporation Pension Plan (January 1, 1985 Restatement), as in effect on
December 31, 1988, and (b) for periods after December 31, 1988, each Year in
which the Participant completes at least 1,000 hours of service with an employer
that is a member of the Controlled Group (including only hours of service
completed while the employer was a member of the Controlled Group). For the
purpose of this definition, hours of service shall be determined in accordance
with Department of Labor Regulations Sections 2530.200b-2(a) and
2530.200b-3(e)(1)(iv) as in effect on January 1, 1994.
1.28. "Year" shall mean the calendar year.
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ARTICLE II
DEFERRAL
2.1. Eligibility. It is the intent of the Corporation to extend
eligibility for the Plan only to those Employees who comprise a select group of
management or highly compensated employees, such that the Plan will qualify for
treatment as "top hat" plan under ERISA. The CEO shall be an Eligible Employee
for each Year that begins after December 31, 1998. Eligible Employees for each
Year that begins after December 31, 1998, other than the CEO, shall be those
Employees designated in writing not later than August 15th of the immediately
preceding Year by the CEO in his sole and absolute discretion but taking into
account the limitation set forth in the immediately preceding sentence. Eligible
Employees for any given Year, other than the CEO, shall be notified in writing
of their eligibility by the Corporation not later than September 1st of the
immediately preceding Year. Notwithstanding the foregoing, if a person first
becomes an Employee after August 15, 1998:
(a) The CEO may in writing designate that Employee as an Eligible
Employee for the Year in which he becomes an Employee within
thirty (30) days after he becomes an Employee;
(b) If the person becomes an Employee between August 16th and
December 31st (inclusive) of a Year, the CEO may in writing
designate that Employee as an Eligible Employee for the
immediately succeeding Year within thirty (30) days after the
person becomes an Employee; and
(c) The Corporation shall notify the Eligible Employee of his
eligibility within ten (10) days after his designation as an
Eligible Employee.
No Employee shall have the right to be designated by the CEO as an Eligible
Employee, and no Employee who has been designated as an Eligible Employee for
any Year shall have the right to be designated as Eligible Employee for any
future Year. An Eligible Employee for a given Year shall be entitled to elect to
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defer the payment of a portion of his Compensation for that Year in accordance
with Section 2.2.
2.2. Amount Deferred. An Eligible Employee for a given Year may elect
to defer up to fifty percent (50%) of each of Incentive Compensation, Long-Term
Incentive Compensation, and Salary for that Year in minimum increments of one
percent (1%) thereof; in no event, however, shall the amount thereof deferred
exceed the amount thereof that constitutes Compensation.
2.3. Deferral Election. Eligible Employees shall make their elections
under the Plan with respect to deferral of Salary not later than December 15th
of the Year immediately preceding the Deferral Year. Eligible Employees shall
make their elections under the Plan with respect to deferral of Incentive
Compensation and Long-Term Incentive Compensation not later than September 30th
of the Year immediately preceding the Deferral Year. Notwithstanding the
foregoing:
(a) In the case of a person who first becomes an Employee after
August 15, 1998, and is designated by the CEO as an Eligible
Employee for the Year in which he becomes an Employee within
thirty (30) days after he becomes an Employee, the Eligible
Employee may make an election with respect to deferral of Salary
for the current Year attributable to services performed
subsequent to his election not later than thirty (30) days after
becoming an Eligible Employee;
(b) In the case of a person who first becomes an Employee after
August 15, 1998, becomes an Employee between August 16th and
December 31st (inclusive) of the Year, and is designated by the
CEO as an Eligible Employee for the immediately succeeding Year
within thirty (30) days after the person becomes an Employee, the
Eligible Employee may make an election with respect to deferral
of Salary for the immediately succeeding Year attributable to
services performed subsequent to his election not later than the
later of thirty (30) days after becoming an Eligible Employee or
December 15th of the Year immediately preceding the Deferral
Year; and
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(c) In the case of a person who first becomes an Employee after
August 15, 1998, becomes an Employee between August 16th and
December 31st (inclusive) of the Year, and is designated by the
CEO as an Eligible Employee for the immediately succeeding Year
within thirty (30) days after the person becomes an Employee, the
Eligible Employee may make elections with respect to deferral of
Incentive Compensation and Long-Term Incentive Compensation not
later than the later of thirty (30) days after becoming an
Eligible Employee or December 31st of the Year immediately
preceding the Deferral Year.
All deferral elections shall be made by the Eligible Employee delivering to the
Corporation a properly executed, written "Deferral Election Form" in the form
prescribed from time to time by the Corporation, which shall be irrevocable
after delivery to the Corporation, and on which the following elections shall be
made:
(a) The percentage of each eligible component of Compensation to be
deferred for the Year in accordance with Section 2.2; and
(b) The deferral period in the event of the Participant's
Retirement in accordance with Section 2.4.
Each Deferral Election Form for a Deferral Year shall require that the deferral
period in the event of the Participant's Retirement in accordance with Section
2.4 shall be the same with respect to each eligible component of Compensation to
be deferred for the Year in accordance with Section 2.2. The amount of
Compensation (if any) elected to be deferred by a Participant under the Plan for
a Deferral Year shall not be paid to or otherwise made available to the
Participant, his Beneficiary, or any other person claiming through the
Participant other than as set forth in the Plan.
2.4. Deferral Period. The date for payment of his Deferred
Compensation Account for a Deferral Year in the case of his Retirement to be
elected by an Eligible Employee shall be the first business day of any calendar
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month, other than January, that begins after the calendar month that immediately
follows the calendar month in which occurs the Participant's Retirement and that
is not later than the one hundred twentieth (120th) calendar month ending after
the calendar month in which occurs the Participant's Retirement, except that the
Eligible Employee may elect that in the event of his death after his Retirement,
the date for payment of the Deferred Compensation Account shall be the earlier
of either: (a) the date on which the Deferred Compensation Account would have
been paid to the Participant but for his death, provided the Participant's
Beneficiary is not the Participant's estate, or, if later, within sixty (60)
days following receipt by the Corporation of evidence satisfactory to the
Corporation of the Participant's death and any other information deemed by the
Corporation necessary or desirable in order to effectuate payment of the
Deferred Compensation Account to the Participant's Beneficiary; or (b) the first
business day of any calendar month, other than January, following receipt by the
Corporation of evidence satisfactory to the Corporation of the Participant's
death and any other information deemed by the Corporation necessary or desirable
in order to effectuate payment of the Deferred Compensation Account to the
Participant's Beneficiary. The date for payment of a Participant's Deferred
Compensation Account(s) in any case in which the Participant's Retirement does
not occur shall be determined under Article IV.
ARTICLE III
ACCOUNTS
3.1. Deferred Compensation Accounts. The Corporation shall establish
and maintain for each Participant a Deferred Compensation Account for each
Deferral Year.
3.2. Account Adjustment (Other Than For Hypothetical Interest). The
amount of Compensation (if any) deferred by a Participant under the Plan for a
Deferral Year shall be credited to the Deferred Compensation Account of the
Participant for that Deferral Year on the date the Compensation deferred
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otherwise would have been paid to the Participant. Each Deferred Compensation
Account shall be debited to reflect any payment of all or any portion of the
balance thereof under Article IV as of the date the payment thereof occurs. For
such purpose, payment shall be deemed to occur as of the date on which payment
is transmitted to the payee in accordance with the terms of the Plan.
3.3. Hypothetical Interest Credits. As of the close of business on
each December 31st occurring prior to the full payment thereof as specified
by Article IV, each Deferred Compensation Account shall be credited with an
amount equal to the product of: (a) the balance of the Deferred Compensation
Account as of the close of business on that December 31st; and (b) the Interest
Rate for the immediately succeeding Year. As of the close of business on the
day immediately preceding the date as of which payment of a Deferred
Compensation Account occurs under Section 4.2, Section 4.3, Section 4.4, or
Section 4.5 (but not Section 4.6), the Deferred Compensation Account shall be
credited with an amount equal to the product of: (a) the balance of the
Deferred Compensation Account as of the close of business on that day; (b) the
Interest Rate for the Year during which the payment occurs; and (c) a fraction,
the numerator of which is the number of days that have elapsed subsequent to the
immediately preceding December 31st through (and including) the date that
payment occurs, and the denominator of which is 365. For purposes of the
immediately preceding sentence, payment shall be deemed to occur as of the date
on which payment is transmitted to the payee in accordance with the terms of
the Plan. If the Interest Rate described in Section 1.18 is no longer
published, or the basis on which the Interest Rate described in Section 1.18 is
changed significantly as determined by the Compensation Committee in its
sole and absolute discretion, the Compensation Committee shall timely, in its
sole and absolute discretion but in good faith, determine by written action a
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substitute interest rate reasonably comparable to the Interest Rate described
in Section 1.18, which prospectively shall be used as the "Interest Rate" for
purposes of the Plan. If any substitute interest rate is no longer published,
or the basis on which the substitute interest rate is changed significantly
as determined by the Compensation Committee in its sole and absolute discretion,
the Compensation Committee shall timely, in its sole and absolute discretion
but in good faith, determine by written action another substitute interest rate
reasonably comparable to the substitute interest rate, which prospectively shall
be used as the "Interest Rate" for the purposes of the Plan.
ARTICLE IV
PAYMENT
4.1. Payment of Deferred Compensation Accounts . The balance of each
Deferred Compensation Account (as determined in accordance with Article III)
shall be paid by the Corporation in a lump sum by check drawn on the Corporation
to the Participant or the Participant's Beneficiary at the earliest time (and as
otherwise) provided in this Article IV.
4.2. Retirement. Except as otherwise provided in Section 4.5, in the
case of the Participant's Retirement, the balance of the Participant's Deferred
Compensation Account shall be paid to the Participant in accordance with the
Participant's Deferral Election Form for that Deferred Compensation Account
under Section 2.3.
4.3. Termination of Employment Other Than By Retirement. Except as
otherwise provided in Section 4.5, if Participant is no longer employed by any
member of the Controlled Group for any reason other than Retirement, the balance
of the Participant's Deferred Compensation Account shall be paid to the
Participant within sixty (60) calendar days after the Participant is no longer
employed by any member of the Controlled Group.
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4.4. Change in Control . Except as otherwise provided in Section 4.5,
the balance of the Participant's Deferred Compensation Account shall be paid to
the Participant, as soon as practicable, but not later than thirty (30) days,
following the date on which a Change in Control occurs.
4.5. Death of Participant . In the event of the death of a Participant
after Retirement, any unpaid balance of the Participant's Deferred Compensation
Account shall be paid to the Participant's Beneficiary in accordance with the
Participant's Deferral Election Form for that Deferred Compensation Account
under Section 2.3. In the event of the death of a Participant before Retirement,
the balance of the Participant's Deferred Compensation Account shall be paid to
the Participant's Beneficiary within sixty (60) calendar days after the
Participant's date of death, or if later as soon as practicable following
receipt by the Corporation of evidence satisfactory to the Corporation of the
Participant's death and any other information deemed by the Corporation
necessary and desirable in order to effectuate payment of the balance of the
Deferred Compensation Account to the Participant's Beneficiary. In the event of
the death of a Participant after the occurrence of a Change of Control, any
unpaid balance of the Participant's Deferred Compensation Account shall be paid
to the Participant's Beneficiary within sixty (60) calendar days after the
Participant's date of death, or if later as soon as practicable following
receipt by the Corporation of evidence satisfactory to the Corporation of the
Participant's death and any other information deemed by the Corporation
necessary and desirable in order to effectuate payment of the balance of the
Deferred Compensation Account to the Participant's Beneficiary. Each Participant
may designate a Beneficiary, which designation shall apply to all of the
Participant's Deferred Compensation Accounts. All designations shall be signed
by the Participant, and shall be in such form as prescribed from time to time by
the Corporation. If so prescribed by the Corporation, the Beneficiary
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designation form may allow the designation of multiple beneficiaries and/or a
successor beneficiary or successor beneficiaries. Each designation shall be
effective only when properly executed and delivered to the Corporation in
accordance with Section 5.4. A Participant's Beneficiary may be changed by the
Participant without the consent of any other person at any time prior to the
Participant's death by proper execution and delivery by the Participant to the
Corporation in accordance with Section 5.4 of a new Beneficiary designation
form. The properly executed Beneficiary designation on file with the Corporation
at the time of the Participant's death that bears the latest date shall govern,
and any Beneficiary designation received thereafter shall be disregarded. If a
Participant does not designate a Beneficiary or for any reason such designation
is ineffective, or if no person designated as Beneficiary survives the
Participant, the Participant's Beneficiary shall be the Participant's estate,
and the balance of the Participant's Deferred Compensation Account(s) shall be
paid to the Participant's estate in a lump sum within sixty (60) days after the
appointment of an executor or administrator. In the event of the death of a
person designated as a Participant's Beneficiary after the death of the
Participant, the amount that would have been paid to the deceased Beneficiary
shall be paid to the deceased Beneficiary's estate in a lump sum sixty (60) days
after the appointment of an executor or administrator.
4.6. Hardship. The Compensation Committee may, in its sole and
absolute discretion, accelerate the payment of all or a portion of the balance
of a Participant's Deferred Compensation Account to the Participant, or to the
Participant's Beneficiary if the Participant is deceased, in the event of an
"unforeseeable emergency" of the Participant or Beneficiary. An "unforeseeable
emergency" of a Participant or Beneficiary shall mean an unanticipated emergency
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that is caused by an event beyond the control of the Participant or Beneficiary
and that would result in severe financial hardship to the individual if payment
were not permitted. The amount of the balance of any Deferred Compensation
Account that the Compensation Committee determines to pay to a Participant or
Beneficiary under this Section 4.6 shall be limited to the amount necessary to
meet the "unforeseeable emergency." Payment shall be made under this Section 4.6
only upon written application by the Participant or Beneficiary therefor, which
written application shall be in such form as the Compensation Committee shall
prescribe from time to time and shall contain such appropriate evidence as the
Compensation Committee shall require evidencing the "unforeseeable emergency."
The Compensation Committee shall determine whether any Participant or
Beneficiary that makes application under this Section 4.6 has an "unforeseeable
emergency" in its sole and absolute discretion.
4.7. Nature of Payment Obligation. The Plan shall create only a
contractual obligation on the part of the Corporation to make payments (subject
to tax and other withholding required by law) when due in accordance with the
Plan out of the general assets of the Corporation. No Participant, Beneficiary,
or other party claiming under the Plan shall have any interest in any specific
asset of the Corporation. To the extent that any party acquires the right to
receive payments under the Plan, such right shall be equivalent to that of an
unsecured general creditor of the Corporation. The Corporation may, but shall
not be obligated to, maintain one or more trusts for the purpose of providing
for payments under the Plan. Any such trust or trusts may be revocable or
irrevocable, but the assets thereof shall be subject to the claims of the
Corporation's general creditors. To the extent that any amounts payable under
the Plan are actually paid from any such trust, the Corporation shall have no
further obligation with respect thereto, but to the extent not so paid, such
amounts shall remain the obligation of, and shall be paid by, the Corporation.
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4.8. Legal Incompetency. Notwithstanding any other provision of the
Plan, the Corporation may, in its discretion, make or cause to be made payment
either directly to an incompetent or disabled person to whom any payment is owed
under the Plan, or to the guardian of such person, or to the person having
custody of such person, without further liability for the amount of such payment
on the part of the Corporation or any other person to the person on whose
account such payment is made.
ARTICLE V
ADMINISTRATION
5.1. Plan Administration. The Corporation shall be responsible for the
general administration of the Plan and for carrying out the provisions hereof
and shall be the "plan administrator" for purposes of ERISA. The Corporation
shall have all such powers as may be necessary to carry out the provisions of
the Plan, including the power to determine all questions relating to eligibility
for and the amount in each Deferred Compensation Account and all questions
pertaining to claims for benefits and procedures for claim review; to resolve
all other questions arising under the Plan, including any questions of
construction and any factual determinations; and to take such further action as
the Corporation shall deem advisable in the administration of the Plan. The
Corporation shall have full and complete discretion in the exercise of its
powers of administration of the Plan, and the actions taken and the decisions
made by the Corporation under the Plan shall be final and binding upon all
interested parties. In accordance with the provisions of Section 503 of ERISA,
the Corporation shall provide a procedure for handling claims under the Plan.
Such procedure shall be in accordance with regulations issued by the Secretary
of Labor and shall provide adequate written notice within a reasonable period of
time with respect to the denial of any claim as well as a reasonable opportunity
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for a full and fair review by the Corporation of any such denial. The
Corporation shall prepare and hand deliver or mail by first class mail to each
Participant by March 1 of each Year, a statement of his Deferred Compensation
Account(s). The Corporation may retain auditors, accountants, legal counsel and
actuarial counsel selected by it. Any person authorized to act on behalf of the
Corporation may act in any such capacity, and any such auditors, accountants,
legal counsel and actuarial counsel may be persons acting in a similar capacity
for one or more members of the Controlled Group and may be employees of one or
more members of the Controlled Group. The opinion of any such auditor,
accountant, legal counsel or actuarial counsel shall be full and complete
authority and protection in respect to any action taken, suffered or omitted by
any person authorized to act on behalf of the Corporation in good faith and in
accordance with such opinion.
5.2. Expenses. The Corporation shall pay all expenses incurred by it
in the administration of the Plan.
5.3. Records. The Corporation shall keep such records as shall be
proper, necessary or desirable to effectuate the purposes of the Plan,
including, without in any manner limiting the generality of the foregoing,
records and information with respect to Participants, dates of employment and
determinations made hereunder.
5.4. Communications. Any notice, filing or other communication
required or permitted to be given to the Corporation under the Plan shall be
hand delivered, or sent by registered or certified mail to Corporation at the
address set forth below or to such other address as the Corporation may have
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furnished to an Eligible Employee, Participant, or Beneficiary in writing in
accordance with the Plan:
ALLTEL Corporation
One Allied Drive
Little Rock, Arkansas 72202
Attention: Chief Executive Officer
Except as provided in Section 5.1 with respect to account statements, any
notice, filing, other communication or payment required or permitted to be given
or made to an Eligible Employee, Participant, or Beneficiary under the Plan
shall be hand delivered, or sent by registered or certified mail to the Eligible
Employee, Participant, or Beneficiary. A notice, filing, communication, or
payment mailed to an Eligible Employee, Participant, or Beneficiary shall be to
such address as is given in the records of the Corporation or to such other
address as the Eligible Employee, Participant, or Beneficiary may have furnished
to the Corporation in writing in accordance with the Plan. Notices to the
Corporation shall be deemed given as of the date of hand delivery or, if
properly mailed, as of the date of actual receipt. Notices to an Eligible
Employee, Participant, or Beneficiary shall be deemed given as of the date of
hand delivery or, if properly mailed, as of the date shown on the postmark on
the receipt for registration or certification, except that notice of change of
address shall be effective only upon actual receipt.
ARTICLE VI
MISCELLANEOUS
6.1. Amendments. The Board from time to time may amend, suspend, or
terminate, in whole or in part, any or all of the provisions of the Plan,
effective as of any date specified in the action by the Board, except that no
such action that adversely affects any benefit under the Plan applicable to
Compensation deferred prior to the date of such amendment, suspension, or
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termination shall be effective with respect to a Participant, or the
Participant's Beneficiary if the Participant is deceased, unless the affected
Participant or Beneficiary consents in writing thereto. Any action of the Board
amending, suspending, or terminating the Plan shall be set forth in a written
resolution of the Board. The Corporation shall furnish a copy of the written
resolution to each Participant, or the Participant's Beneficiary if the
Participant is deceased, affected thereby as soon as practicable after the
adoption of the resolution.
6.2. No Employment or Other Rights. Neither the establishment or
maintenance of the Plan nor the status of a person as an employee, Employee,
Eligible Employee, or a Participant shall give any person any right to be
retained in the employ of any member of the Controlled Group; and no
Participant, Beneficiary, or person claiming under or through a Participant
shall have any right or interest in any benefit under the Plan unless and until
the terms, conditions and provisions of the Plan affecting the Participant shall
been satisfied. The provisions of the Plan shall not be construed as giving any
person, firm or entity any legal or equitable right as against any member of the
Controlled Group, their officers, employees, or directors, except any such
rights as are specifically provided for in the Plan or are hereafter created in
accordance with the terms and provisions of the Plan.
6.3. Severability. The invalidity and unenforceability of any
particular provision of the Plan shall not affect any other provision hereof,
and the Plan shall be construed in all respects as if such invalid or
unenforceable provision were omitted herefrom.
6.4. Nonalienation . The right of any Participant, Beneficiary, or any
person claiming under or through a Participant to any benefit or any payment
under the Plan shall not be subject in any manner to attachment or other legal
process for the debts of the Participant, Beneficiary, or other person; and the
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same shall not be subject to anticipation, alienation, sale, transfer,
assignment or encumbrance.
6.5. Limitation of Liability. No member of the Board or Compensation
Committee and no officer, employee, or director of any member of the Controlled
Group shall be liable to any person for any action taken or omitted in
connection with the Plan, nor shall any member of the Controlled Group other
than the Corporation be liable to any person for any such action or omission,
and the sole liability of the Corporation under the Plan shall be to make the
payments provided for under the Plan when due. No person shall, because of the
Plan, acquire any right to an accounting or to examine the books or the affairs
of the Corporation or any other member of the Controlled Group. Nothing in the
Plan shall be construed to create any trust or fiduciary relationship.
6.6. Construction and Governing Law. Words used herein in the
masculine gender shall be construed to include the feminine gender where
appropriate and the words used herein in the singular or plural shall be
construed as being in the plural or singular where appropriate. Article and
Section titles are for convenience of reference only and shall not be considered
in construing the provisions of the Plan. The Plan shall be construed, enforced,
and administered and the validity thereof determined in accordance with the law
of the State of Delaware, to the extent that applicable federal law does not
apply to the Plan.
IN WITNESS WHEREOF, ALLTEL CORPORATION has caused this Plan to be
executed this 24 day of June, 1998.
--
ALLTEL CORPORATION
By: /s/ Scott Ford
-------------------------------
Title: President and COO
----------------------------
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ALLTEL CORPORATION
1998 DIRECTORS' DEFERRED COMPENSATION PLAN
50
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TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS 1
1.1. Beneficiary 1
1.2. Board 1
1.3. Change in Control 1
1.4. Code 2
1.5. Compensation 2
1.6. Continuing Directors 3
1.7. Controlled Group 3
1.8. Corporation 3
1.9. Deferral Year 3
1.10. Deferred Compensation Account 3
1.11. Director 4
1.12. Interest Rate 4
1.13. Participant 4
1.14. Person 4
1.15. Plan 4
1.16. Subsidiary 4
1.17. Termination of Service 5
1.18. Year 5
ARTICLE II DEFERRAL 5
2.1. Eligibility 5
2.2. Amount Deferred 5
2.3. Deferral Election 5
2.4. Deferral Period 6
ARTICLE III ACCOUNTS 7
3.1. Deferred Compensation Accounts 7
3.2. Account Adjustment (Other Than For Hypothetical
Interest) 7
3.3. Hypothetical Interest Credits 7
ARTICLE IV PAYMENT 9
4.1. Payment of Deferred Compensation Accounts 9
4.2. Termination of Service 9
4.3. Change in Control 9
4.4. Death of Participant 9
4.5. Hardship 11
4.6. Nature of Payment Obligation 11
4.7. Legal Incompetency 12
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ARTICLE V ADMINISTRATION 12
5.1. Plan Administration 12
5.2. Expenses 13
5.3. Records 13
5.4. Communications 14
ARTICLE VI MISCELLANEOUS 15
6.1. Amendments 15
6.2. No Other Rights 15
6.3. Severability 16
6.4. Nonalienation 16
6.5. Limitation of Liability 16
6.6. Construction and Governing Law 16
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ALLTEL CORPORATION
1998 DIRECTORS' DEFERRED COMPENSATION PLAN
ALLTEL Corporation (the "Corporation"), hereby establishes, effective
as of June 23, 1998, the deferred compensation plan set forth herein, which
shall be known as the ALLTEL Corporation 1998 Directors' Deferred Compensation
Plan (the "Plan"). The purpose of the Plan is to provide to non-employee
directors of the Corporation the option of deferring a portion of their
directors' fees to be received from the Corporation.
ARTICLE I
DEFINITIONS
For the purposes hereof, the following words and phrases shall have the
meanings indicated:
1.1. "Beneficiary" shall mean the beneficiary(ies) determined in
accordance with the Plan to receive payment of the Participant's Deferred
Compensation Account(s) in the event of the death of the Participant prior to
payment to him of his Deferred Compensation Account(s).
1.2. "Board" shall mean the Board of Directors of the Corporation.
1.3. A "Change in Control" shall mean, if subsequent to June 23, 1998:
(a) Any "person," as defined in Section 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), other than the Corporation, any of its
subsidiaries, or any employee benefit plan maintained by the
Corporation or any of its subsidiaries, becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act) of (i)
15% or more, but no greater than 50%, of the outstanding voting
capital stock of the Corporation, unless prior thereto, the
Continuing Directors approve the transaction that results in the
person becoming the beneficial owner of 15% or more, but no
greater than 50%, of the outstanding voting capital stock of the
Corporation or (ii) more than 50% of the outstanding voting
capital stock of the Corporation, regardless whether the
transaction or event by which the foregoing 50% level is exceeded
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is approved by the Continuing Directors; or
(b) At any time Continuing Directors no longer
constitute a majority of the directors of the Corporation; or
(c) A record date is fixed for determining
stockholders entitled to vote upon (i) a merger or consolidation
of the Corporation, statutory share exchange, or other similar
transaction with another corporation, partnership, or other
entity or enterprise in which either the Corporation is not the
surviving or continuing corporation or shares of common stock of
the Corporation are to be converted into or exchanged for cash,
securities other than common stock of the Corporation, or other
property, (ii) a sale or disposition of all or substantially all
of the assets of the Corporation, or (iii) the dissolution of the
Corporation; or
(d) The Corporation enters into an agreement with any
Person, the consummation of which would result in the occurrence
of an event described in clause (a), (b), or (c) above of this
Section 1.3.
1.4. "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
1.5. "Compensation" of a Director shall mean the director's fees
payable to a Director by the Corporation that, but for the provisions of the
Plan, would be paid in cash (or by check) to the Director by the Corporation
with respect to any Year beginning after December 31, 1998, excluding, however,
any amount that, but for the provisions of the Plan, would be paid to a person
who on the date of payment is no longer a Director, except fees for the period
in which the Director's Termination of Service occurs. For purposes of the
immediately preceding sentence, "director's fees" shall mean the annual base
fee, any fee for service as chairman of a Board committee, any fee for
attendance at a Board meeting, and any fee for attendance at a Board committee
meeting.
1.6. "Continuing Directors" shall mean that directors who were
directors of the Corporation at the beginning of the 24-month period ending on
the date the determination is made or whose election, or nomination for election
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by the Corporation's stockholders, was approved by at least a majority of the
directors who are in office at the time of the election or nomination and who
either (i) were directors at the beginning of the period, or (ii) were elected,
or nominated for election, by at least a majority of the directors who were in
office at the time of the election or nomination and were directors at the
beginning of the period.
1.7. "Controlled Group" shall mean the Corporation and any and all
other corporations, trades and/or businesses or organizations, the employees of
which together with the employees of the Corporation are, pursuant to the
applicable provisions of Section 414 of the Internal Revenue Code of 1986 as in
effect on January 1, 1994, treated as if they were employed by a single
employer, but with respect only to periods during which the controlled group
status described in Section 414 of the Internal Revenue Code of 1986 as in
effect on January 1, 1994 exists.
1.8. "Corporation" shall mean ALLTEL Corporation, a Delaware
corporation, and any successor to its business or assets, by operation of law or
otherwise.
1.9. "Deferral Year" shall mean, with respect to a Participant, a Year
in which compensation is deferred in accordance with the Plan.
1.10. "Deferred Compensation Account" shall mean a bookkeeping account
on which the amount of Compensation that is deferred by a Participant under the
Plan and any adjustments thereto in accordance with the Plan shall be recorded.
A separate Deferred Compensation Account shall be established for each Deferral
Year.
1.11. "Director" shall mean a person who is a director of the
Corporation and who is not an employee of the Corporation or any other member of
the Controlled Group.
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1.12. "Interest Rate" shall, except as otherwise provided in Section
3.3, mean a percentage equal to the "Prime Rate" as published in the first issue
(in which "Prime Rate" is published) of the Wall Street Journal during each Year
beginning after December 31, 1998, plus two hundred (200) basis points.
1.13. "Participant" shall mean a Director or former Director who has
deferred payment of any of his compensation in accordance with the Plan and who
has not received full payment of the balance(s) of his Deferred Compensation
Account(s).
1.14. "Person" shall have the meaning given in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended from time to time, as modified and
used in Sections 13(d) and 14(d) thereof; except that, a Person shall not
include (a) the Corporation or any Subsidiary, (b) a trustee or other fiduciary
holding securities under an employee benefit plan of the Corporation or any
Subsidiary, or (c) an underwriter temporarily holding securities pursuant to an
offering of such securities.
1.15. "Plan" shall mean the deferred compensation plan set forth
herein, together with all amendments hereto, which shall be called the "ALLTEL
Corporation 1998 Directors' Deferred Compensation Plan".
1.16. "Subsidiary" shall mean any corporation or other entity or
enterprise, whether incorporated or unincorporated, of which at least a majority
of the securities or other interests having by their terms ordinary voting power
to elect a majority of the board of directors or others serving similar
functions with respect to such corporation or other entity or enterprise is
owned by the Corporation or other entity or enterprise of which the Corporation
directly or indirectly owns securities or other interests having all the voting
power.
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1.17. "Termination of Service" shall mean that a person who was a
Director is no longer a Director for any reason.
1.18. "Year" shall mean the calendar year.
ARTICLE II
DEFERRAL
2.1. Eligibility. Each Director shall be entitled to elect to defer
the payment of a portion of his Compensation for a Year in accordance with
Section 2.2.
2.2. Amount Deferred. A Director may elect to defer up to one hundred
percent (100%) of his Compensation for a Year in minimum increments of one
percent (1%) of Compensation.
2.3. Deferral Election. Directors' shall make their elections under
the Plan with respect to deferral of Compensation not later than December 15th
of the Year immediately preceding the Deferral Year. Notwithstanding the
foregoing:
(a) In the case of a person who first becomes a Director after
December 15, 1998, the Director may make an election with
respect to deferral of Compensation for the current Year
attributable to services performed subsequent to his election
not later than thirty (30) days after becoming a Director; and
(b) In the case of a person who first becomes a Director after
December 15, 1998, and who becomes a Director between
December 16th and December 31st (inclusive) of the Year, the
Director may make an election with respect to deferral of
Compensation for the immediately succeeding Year attributable
to services performed subsequent to his election not later
than the later of thirty (30) days after becoming an Director.
All deferral elections shall be made by the Director delivering to the
Corporation a properly executed, written "Deferral Election Form" in the form
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prescribed from time to time by the Corporation, which shall be irrevocable
after delivery to the Corporation, and on which the following elections shall be
made:
(a) The percentage of Compensation to be
deferred for the Year in accordance
with Section 2.2; and
(b) The deferral period in accordance with
Section 2.4.
The amount of Compensation (if any) elected to be deferred by a Participant
under the Plan for a Deferral Year shall not be paid to or otherwise made
available to the Participant, his Beneficiary, or any other person claiming
through the Participant other than as set forth in the Plan.
2.4. Deferral Period. The date for payment of his Deferred
Compensation Account for a Deferral Year to be elected by a Director shall be
the first business day of any calendar month, other than January, that begins
after the calendar month that immediately follows the calendar month in which
occurs the Participant's Termination of Service and that is not later than the
one hundred twentieth (120th) calendar month ending after the calendar month in
which occurs the Participant's Termination of Service, except that the Director
may elect that in the event of his death after his Termination of Service, the
date for payment of the Deferred Compensation Account shall be the earlier of
either: (a) the date on which the Deferred Compensation Account would have been
paid to the Participant but for his death, provided the Participant's
Beneficiary is not the Participant's estate, or, if later, the first business
day of any calendar month, other than January, following receipt by the
Corporation of evidence satisfactory to the Corporation of the Participant's
death and any other information deemed by the Corporation necessary or desirable
in order to effectuate payment of the Deferred Compensation Account to the
Participant's Beneficiary; or (b) the first business day of any calendar month,
other than January, following receipt by the Corporation of evidence
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satisfactory to the Corporation of the Participant's death and any other
information deemed by the Corporation necessary or desirable in order to
effectuate payment of the Deferred Compensation Account to the Participant's
Beneficiary.
ARTICLE III
ACCOUNTS
3.1. Deferred Compensation Accounts. The Corporation shall establish
and maintain for each Participant a Deferred Compensation Account for each
Deferral Year.
3.2. Account Adjustment (Other Than For Hypothetical Interest). The
amount of Compensation (if any) deferred by a Participant under the Plan for a
Deferral Year shall be credited to the Deferred Compensation Account of the
Participant for that Deferral Year on the date the Compensation deferred
otherwise would have been paid to the Participant. Each Deferred Compensation
Account shall be debited to reflect any payment of all or any portion of the
balance thereof under Article IV as of the date the payment thereof occurs. For
such purpose, payment shall be deemed to occur as of the date on which payment
is transmitted to the payee in accordance with the terms of the Plan.
3.3. Hypothetical Interest Credits. As of the close of business on
each December 31st occurring prior to the full payment thereof as specified
by Article IV, each Deferred Compensation Account shall be credited with an
amount equal to the product of: (a) the balance of the Deferred Compensation
Account as of the close of business on that December 31st; and (b) the Interest
Rate for the immediately succeeding Year. As of the close of business on
the day immediately preceding the date as of which payment of a Deferred
Compensation Account occurs under Section 4.2, Section 4.3, or Section 4.4
(but not Section 4.5), the Deferred Compensation Account shall be credited with
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<PAGE>
an amount equal to the product of: (a) the balance of the Deferred Compensation
Account as of the close of business on that day; (b) the Interest Rate for the
Year during which the payment occurs; and (c) a fraction, the numerator of
which is the number of days that have elapsed subsequent to the immediately
preceding December 31st through (and including) the date that payment occurs,
and the denominator of which is 365. For purposes of the immediately preceding
sentence, payment shall be deemed to occur as of the date on which payment is
transmitted to the payee in accordance with the terms of the Plan. If the
Interest Rate described in Section 1.12 is no longer published, or the basis
on which the Interest Rate described in Section 1.12 is changed significantly
as determined by the Board in its sole and absolute discretion, the Board shall
timely, in its sole and absolute discretion but in good faith, determine by
written action a substitute interest rate reasonably comparable to the Interest
Rate described in Section 1.12, which prospectively shall be used as the
"Interest Rate" for purposes of the Plan. If any substitute interest rate is no
longer published, or the basis on which the substitute interest rate is changed
significantly as determined by the Board in its sole and absolute discretion,
the Board shall timely, in its sole and absolute discretion but in good faith,
determine by written action another substitute interest rate reasonably
comparable to the substitute interest rate, which prospectively shall be used
as the "Interest Rate" for the purposes of the Plan.
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ARTICLE IV
PAYMENT
4.1. Payment of Deferred Compensation Accounts. The balance of each
Deferred Compensation Account (as determined in accordance with Article III)
shall be paid by the Corporation in a lump sum by check drawn on the Corporation
to the Participant or the Participant's Beneficiary at the earliest time (and as
otherwise) provided in this Article IV.
4.2. Termination of Service. Except as otherwise provided in Section
4.4, in the case of the Participant's Termination of Service, the balance of the
Participant's Deferred Compensation Account shall be paid to the Participant in
accordance with the Participant's Deferral Election Form for that Deferred
Compensation Account under Section 2.3.
4.3. Change in Control. Except as otherwise provided in Section 4.4,
the balance of the Participant's Deferred Compensation Account shall be paid to
the Participant, as soon as practicable, but not later than thirty (30) days,
following the date on which a Change in Control occurs.
4.4. Death of Participant. In the event of the death of a Participant,
any unpaid balance of the Participant's Deferred Compensation Account shall be
paid to the Participant's Beneficiary in accordance with the Participant's
Deferral Election Form for that Deferred Compensation Account under Section 2.3.
In the event of the death of a Participant after the occurrence of a Change of
Control, any unpaid balance of the Participant's Deferred Compensation Account
shall be paid to the Participant's Beneficiary within sixty (60) calendar days
after the Participant's date of death, or if later as soon as practicable
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<PAGE>
following receipt by the Corporation of evidence satisfactory to the Corporation
of the Participant's death and any other information deemed by the Corporation
necessary and desirable in order to effectuate payment of the balance of the
Deferred Compensation Account to the Participant's Beneficiary. Each Participant
may designate a Beneficiary, which designation shall apply to all of the
Participant's Deferred Compensation Accounts. All designations shall be signed
by the Participant, and shall be in such form as prescribed from time to time by
the Corporation. If so prescribed by the Corporation, the Beneficiary
designation form may allow the designation of multiple beneficiaries and/or a
successor beneficiary or successor beneficiaries. Each designation shall be
effective only when properly executed and delivered to the Corporation in
accordance with Section 5.4. A Participant's Beneficiary may be changed by the
Participant without the consent of any other person at any time prior to the
Participant's death by proper execution and delivery by the Participant to the
Corporation in accordance with Section 5.4 of a new Beneficiary designation
form. The properly executed Beneficiary designation on file with the Corporation
at the time of the Participant's death that bears the latest date shall govern,
and any Beneficiary designation received thereafter shall be disregarded. If a
Participant does not designate a Beneficiary or for any reason such designation
is ineffective, or if no person designated as Beneficiary survives the
Participant, the Participant's Beneficiary shall be the Participant's estate,
and the balance of the Participant's Deferred Compensation Account(s) shall be
paid to the Participant's estate in a lump sum within sixty (60) days after the
appointment of an executor or administrator. In the event of the death of a
person designated as a Participant's Beneficiary after the death of the
Participant, the amount that would have been paid to the deceased Beneficiary
shall be paid to the deceased Beneficiary's estate in a lump sum sixty (60) days
after the appointment of an executor or administrator.
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<PAGE>
4.5. Hardship. The Board may, in its sole and absolute discretion,
accelerate the payment of all or a portion of the balance of a Participant's
Deferred Compensation Account to the Participant, or to the Participant's
Beneficiary if the Participant is deceased, in the event of an "unforeseeable
emergency" of the Participant or Beneficiary. An "unforeseeable emergency" of a
Participant or Beneficiary shall mean an unanticipated emergency that is caused
by an event beyond the control of the Participant or Beneficiary and that would
result in severe financial hardship to the individual if payment were not
permitted. The amount of the balance of any Deferred Compensation Account that
the Board determines to pay to a Participant or Beneficiary under this Section
4.5 shall be limited to the amount necessary to meet the "unforeseeable
emergency." Payment shall be made under this Section 4.5 only upon written
application by the Participant or Beneficiary therefor, which written
application shall be in such form as the Board shall prescribe from time to time
and shall contain such appropriate evidence as the Board shall require
evidencing the "unforeseeable emergency." The Board shall determine whether any
Participant or Beneficiary that makes application under this Section 4.5 has an
"unforeseeable emergency" in its sole and absolute discretion. If a Participant
who makes application under this Section 4.5 is a member of the Board, any
action of the Participant in his capacity as a member of the Board with respect
to his application under this Section 4.5 shall not be taken into account for
purposes of this Section 4.5.
4.6. Nature of Payment Obligation. The Plan shall create only a
contractual obligation on the part of the Corporation to make payments (subject
to tax and other withholding required by law) when due in accordance with the
Plan out of the general assets of the Corporation. No Participant, Beneficiary,
or other party claiming under the Plan shall have any interest in any specific
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<PAGE>
asset of the Corporation. To the extent that any party acquires the right to
receive payments under the Plan, such right shall be equivalent to that of an
unsecured general creditor of the Corporation. The Corporation may, but shall
not be obligated to, maintain one or more trusts for the purpose of providing
for payments under the Plan. Any such trust or trusts may be revocable or
irrevocable, but the assets thereof shall be subject to the claims of the
Corporation's general creditors. To the extent that any amounts payable under
the Plan are actually paid from any such trust, the Corporation shall have no
further obligation with respect thereto, but to the extent not so paid, such
amounts shall remain the obligation of, and shall be paid by, the Corporation.
4.7. Legal Incompetency. Notwithstanding any other provision of the
Plan, the Corporation may, in its discretion, make or cause to be made payment
either directly to an incompetent or disabled person to whom any payment
is owed under the Plan, or to the guardian of such person, or to the person
having custody of such person, without further liability for the amount of such
payment on the part of the Corporation or any other person to the person on
whose account such payment is made.
ARTICLE V
ADMINISTRATION
5.1. Plan Administration. The Corporation shall be responsible for the
general administration of the Plan and for carrying out the provisions hereof.
The Corporation shall have all such powers as may be necessary to carry out the
provisions of the Plan, including the power to determine all questions relating
to eligibility for and the amount in each Deferred Compensation Account and all
questions pertaining to claims for benefits and procedures for claim review; to
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<PAGE>
resolve all other questions arising under the Plan, including any questions of
construction and any factual determinations; and to take such further action as
the Corporation shall deem advisable in the administration of the Plan. The
Corporation shall have full and complete discretion in the exercise of its
powers of administration of the Plan, and the actions taken and the decisions
made by the Corporation under the Plan shall be final and binding upon all
interested parties. The Corporation shall provide a procedure for handling
claims under the Plan. Such procedure shall provide adequate written notice
within a reasonable period of time with respect to the denial of any claim as
well as a reasonable opportunity for a full and fair review by the Corporation
of any such denial. The Corporation shall prepare and hand deliver or mail by
first class mail to each Participant by March 1 of each Year, a statement of his
Deferred Compensation Account(s). The Corporation may retain auditors,
accountants, legal counsel and actuarial counsel selected by it. Any person
authorized to act on behalf of the Corporation may act in any such capacity, and
any such auditors, accountants, legal counsel and actuarial counsel may be
persons acting in a similar capacity for one or more members of the Controlled
Group and may be employees of one or more members of the Controlled Group. The
opinion of any such auditor, accountant, legal counsel or actuarial counsel
shall be full and complete authority and protection in respect to any action
taken, suffered or omitted by any person authorized to act on behalf of the
Corporation in good faith and in accordance with such opinion.
5.2. Expenses. The Corporation shall pay all expenses incurred by it
in the administration of the Plan.
5.3. Records. The Corporation shall keep such records as shall be
proper, necessary or desirable to effectuate the purposes of the Plan,
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<PAGE>
including, without in any manner limiting the generality of the foregoing,
records and information with respect to Participants, dates of employment and
determinations made hereunder.
5.4. Communications. Any notice, filing or other communication
required or permitted to be given to the Corporation under the Plan shall
be hand delivered, or sent by registered or certified mail to Corporation at the
address set forth below or to such other address as the Corporation may have
furnished to a Director, Participant, or Beneficiary in writing in accordance
with the Plan:
ALLTEL Corporation
One Allied Drive
Little Rock, Arkansas 72202
Attention: Chief Executive Officer
Except as provided in Section 5.1 with respect to account statements, any
notice, filing, other communication or payment required or permitted to be given
or made to a Director, Participant, or Beneficiary under the Plan shall be hand
delivered, or sent by registered or certified mail to the Director, Participant,
or Beneficiary. A notice, filing, communication, or payment mailed to a
Director, Participant, or Beneficiary shall be to such address as is given in
the records of the Corporation or to such other address as the Director,
Participant, or Beneficiary may have furnished to the Corporation in writing in
accordance with the Plan. Notices to the Corporation shall be deemed given as of
the date of hand delivery or, if properly mailed, as of the date of actual
receipt. Notices to a Director, Participant, or Beneficiary shall be deemed
given as of the date of hand delivery or, if properly mailed, as of the date
shown on the postmark on the receipt for registration or certification, except
that notice of change of address shall be effective only upon actual receipt.
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<PAGE>
ARTICLE VI
MISCELLANEOUS
6.1. Amendments. The Board from time to time may amend, suspend, or
terminate, in whole or in part, any or all of the provisions of the Plan,
effective as of any date specified in the action by the Board, except that no
such action that adversely affects any benefit under the Plan applicable to
Compensation deferred prior to the date of such amendment, suspension, or
termination shall be effective with respect to a Participant, or the
Participant's Beneficiary if the Participant is deceased, unless the affected
Participant or Beneficiary consents in writing thereto. Any action of the Board
amending, suspending, or terminating the Plan shall be set forth in a written
resolution of the Board. The Corporation shall furnish a copy of the written
resolution to each Participant, or the Participant's Beneficiary if the
Participant is deceased, affected thereby as soon as practicable after the
adoption of the resolution.
6.2. No Other Rights. Neither the establishment or maintenance of the
Plan nor the status of a person as Director or a Participant shall give any
person any right to be retained as a director of the Corporation; and no
Participant, Beneficiary, or person claiming under or through a Participant
shall have any right or interest in any benefit under the Plan unless and until
the terms, conditions and provisions of the Plan affecting the Participant shall
been satisfied. The provisions of the Plan shall not be construed as giving any
person, firm or entity any legal or equitable right as against any member of the
Controlled Group, their officers, employees, or directors, except any such
rights as are specifically provided for in the Plan or are hereafter created in
accordance with the terms and provisions of the Plan.
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<PAGE>
6.3. Severability. The invalidity and unenforceability of any
particular provision of the Plan shall not affect any other provision hereof,
and the Plan shall be construed in all respects as if such invalid or
unenforceable provision were omitted herefrom.
6.4. Nonalienation. The right of any Participant, Beneficiary, or any
person claiming under or through a Participant to any benefit or any payment
under the Plan shall not be subject in any manner to attachment or other legal
process for the debts of the Participant, Beneficiary, or other person; and the
same shall not be subject to anticipation, alienation, sale, transfer,
assignment or encumbrance.
6.5. Limitation of Liability. No member of the Board and no officer,
employee, ory director of any member of the Controlled Group shall be liable to
any person for any action taken or omitted in connection with the Plan, nor
shall any member of the Controlled Group other than the Corporation be liable to
any person for any such action or omission, and the sole liability of the
Corporation under the Plan shall be to make the payments provided for under the
Plan when due. No person shall, because of the Plan, acquire any right to an
accounting or to examine the books or the affairs of the Corporation or any
other member of the Controlled Group. Nothing in the Plan shall be construed to
create any trust or fiduciary relationship.
6.6. Construction and Governing Law. Words used herein in the
masculine gender shall be construed to include the feminine gender where
appropriate and the words used herein in the singular or plural shall be
construed as being in the plural or singular where appropriate. Article and
Section titles are for convenience of reference only and shall not be considered
in construing the provisions of the Plan. The Plan shall be construed, enforced,
and administered and the validity thereof determined in accordance with the law
-16-
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<PAGE>
of the State of Delaware, to the extent that applicable federal law does not
apply to the Plan.
IN WITNESS WHEREOF, ALLTEL CORPORATION has caused this Plan to be
executed this 24 day of June, 1998.
----
ALLTEL CORPORATION
By: /s/ Scott Ford
-----------------------
Title: President & COO
--------------------
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69
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SECOND QUARTER REPORT TO STOCKHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000065873
<NAME> ALLTEL CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 36,722
<SECURITIES> 0
<RECEIVABLES> 567,208
<ALLOWANCES> 20,568
<INVENTORY> 46,601
<CURRENT-ASSETS> 702,106
<PP&E> 5,720,250
<DEPRECIATION> 2,503,608
<TOTAL-ASSETS> 5,876,855
<CURRENT-LIABILITIES> 662,522
<BONDS> 1,694,434
5,128
9,134
<COMMON> 184,355
<OTHER-SE> 2,320,703
<TOTAL-LIABILITY-AND-EQUITY> 5,876,855
<SALES> 295,813
<TOTAL-REVENUES> 1,781,454
<CGS> 197,444
<TOTAL-COSTS> 1,393,405
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 65,916
<INCOME-PRETAX> 516,156
<INCOME-TAX> 195,707
<INCOME-CONTINUING> 320,449
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 320,449
<EPS-PRIMARY> 1.74
<EPS-DILUTED> 1.72
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