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 March 31, 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 March 31, 1998:
184,309,614
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The Exhibit Index is located at sequential page 16 .
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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 March 31, 1998, a copy of which is attached
hereto, are incorporated herein by reference:
Consolidated Statements of Income - for the three and
twelve months ended March 31, 1998 and 1997.
Consolidated Balance Sheets - March 31, 1998 and 1997 and
December 31, 1997.
Consolidated Statements of Cash Flows - for the three
and twelve months ended March 31, 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 Company's total capital structure was $4.2 billion at March 31, 1998,
reflecting 57 percent common and preferred equity and 43 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. The
Company has adequate internal and external resources available to finance its
ongoing operating requirements, including capital expenditures, business
development and the payment of dividends.
Cash provided from operations was $268.7 million and $820.0 million for the
three and twelve month periods ended March 31, 1998, respectively, compared to
$246.9 million and $876.0 million for the same periods in 1997. The increase
in the three month period reflects growth in the earnings of the Company,
decreased working capital requirements and the timing of additional income tax
payments associated with a gain on the sale of a portion of the Company's
investment in WorldCom, Inc. common stock, as further discussed below. The
decrease in the twelve month period primarily reflects increased working
capital requirements, timing of property tax payments and additional income tax
payments resulting from the sale of the Company's healthcare operations
completed in January 1997, as further discussed below. These decreases in cash
flows from operations were partially offset by growth in earnings of the
Company and the timing of additional income tax payments related to the gain
from the sale of WorldCom, Inc. common stock.
Capital expenditures for the three and twelve month periods ended
March 31, 1998 were $100.3 million and $500.6 million, respectively, compared
to $145.4 million and $506.2 million for the same periods in 1997. During the
past two-year period, the Company financed the majority of its capital
expenditures through the internal generation of 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 other communications
services, including long-distance, Internet and local competitive access
services. Capital expenditures are forecast at approximately $605 million for
1998, which are expected to be financed primarily from internally generated
funds. Cash flows from investing activities for the twelve month period of
1998 also 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 three and twelve month
periods ended March 31, 1998 include proceeds of $40.7 million and $226.6
million, respectively, 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 include proceeds
of $95.7 million received from the sale of assets, principally consisting of
two non-strategic operations. In September 1997, the Company received cash
proceeds of $48.7 million in connection with the sale of an investment in a
software company. Additionally, 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. The three and twelve month periods ended
March 31, 1997 include cash proceeds of $104.9 million from the sale of the
Company's 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 three and twelve month periods ended March 31, 1998
were $53.6 million and $207.9 million, respectively, compared to $52.0 million
and $200.6 million for the same periods in 1997. The increases in dividend
payments in both periods primarily 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
4.1 million of its common shares at a total cost of $143.1 million during the
twelve month period ended March 31, 1998. The Company did not repurchase any
of its common stock during the first quarter of 1998. During the twelve month
period ended March 31, 1997, ALLTEL repurchased approximately 3.4 million of
its common shares at a total cost of $108.1 million. Of this total,
$32.5 million was expended during the first three months of 1997.
The Company has a $750 million revolving credit agreement. Borrowings
outstanding under this agreement at March 31, 1998 were $129.5 million,
compared to $247.9 million that were outstanding at December 31, 1997.
Borrowings outstanding under this agreement at March 31, 1997 were $28.8
million. The weighted average interest rate on borrowings outstanding under
this agreement at March 31, 1998, was 5.9 percent. The net reduction in
revolving credit agreement borrowings from December 31, 1997, represents
substantially all of the long-term debt retired in the three month period ended
March 31, 1998. The net increase in revolving credit agreement borrowings from
March 31, 1997, represent all of the long-term debt issued in the twelve month
period ended March 31, 1998. The additional borrowings during the twelve month
period of 1998 were incurred primarily to fund the stock repurchase program and
to acquire the PCS licensing rights. As previously discussed, proceeds from
the sales of WorldCom, Inc. common stock and the wire and cable operations were
used primarily to reduce the amount of borrowings outstanding under the
revolving credit agreement. Scheduled long-term debt retirements, net of the
revolving credit agreement activity, amounted to $12.3 million and $48.4
million for the three and twelve month periods ended March 31, 1998,
respectively.
CONSOLIDATED RESULTS OF OPERATIONS
Revenues and sales increased $62.7 million or 8 percent and $123.8 million
or 4 percent for the three and twelve month periods ended March 31, 1998,
respectively. Operating income increased $10.3 million or 6 percent and
$155.7 million or 26 percent for the three and twelve month periods ended
March 31, 1998, respectively. Growth in revenues and sales in the three and
twelve month 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 twelve
month periods ended March 31, 1998 and 1997, both 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 $94.2 million or 13 percent and $346.7 million or
12 percent and operating income would have increased $11.5 million or 6 percent
and $62.4 million or 9 percent for the three and twelve months ended
March 31, 1998, respectively.
Net income increased $21.8 million or 21 percent and $220.4 million or
71 percent for the three and twelve month periods ended March 31, 1998,
respectively. Basic earnings per common share increased 24 percent and
75 percent for the three and twelve month periods ended March 31, 1998,
respectively. In addition to the sales of HWC and the healthcare operations,
reported net income and earnings per share amounts were impacted by several
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 $9.5 million or 10 percent
and $41.0 million or 11 percent, while basic earnings per share would have
increased 12 percent and 13 percent in the three and twelve month periods
ended March 31, 1998, respectively.
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>
<CAPTION>
(Dollars in thousands, except per share amounts)
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Three Months Ended Twelve Months Ended
March 31, March 31,
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1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Net income, as reported $123,551 $101,708 $529,729 $309,372
Disposition of healthcare and wire and cable operations - (657) (181) (5,567)
Non-recurring items, net of tax:
Provision to reduce carrying value of certain assets - - 11,744 72,716
Gain on disposal of assets (22,273) (9,221) (132,947) (9,221)
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Net income, as adjusted $101,278 $ 91,830 $408,345 $367,300
======== ======== ======== ========
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Basic earnings per share, as reported $.67 $.54 $2.85 $1.63
Disposition of healthcare and wire and cable operations - - - (.02)
Non-recurring items:
Provision to reduce carrying value of certain assets - - .06 .38
Gain on disposal of assets (.12) (.05) (.71) (.05)
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Basic earnings per share, as adjusted $.55 $.49 $2.20 $1.94
==== ==== ===== =====
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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 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 resulted in an increase of $22.6 million in net income and
$.12 in earnings 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>
<CAPTION>
Communications-Wireline Operations
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Three Months Ended Twelve Months Ended
(Dollars in thousands) March 31, March 31,
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1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Local service $121,672 $111,890 $475,870 $437,777
Network access and long-distance 171,646 153,103 666,135 598,086
Miscellaneous 41,129 36,183 160,148 144,581
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Total revenues and sales $334,447 $301,176 $1,302,153 $1,180,444
Operating income $115,655 $105,901 $456,204 $408,848
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</TABLE>
Wireline revenues and sales increased $33.3 million or 11 percent and
$121.7 million or 10 percent for the three and twelve months ended March 31,
1998, respectively. Wireline operating income increased $9.8 million or 9
percent and $47.4 million or 12 percent for the three and twelve month periods
of 1998, respectively.
Local service revenues increased $9.8 million or 9 percent and $38.1
million or 9 percent in the three and twelve month periods ended March 31,
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 increase in local service revenues in both
periods of 1998.
Network access and long-distance revenues increased $18.5 million or 12
percent and $68.0 million or 11 percent for the three and twelve month periods
ended March 31, 1998, respectively. The increases in both periods primarily
reflect growth in ALLTEL's long-distance operations and higher volumes of
access usage. During the past twelve month period, the number of long-distance
customers grew to 315,309 from 154,265, an increase of 161,044 customers or 104
percent. As a result of this strong growth in customers, the long-distance
operations generated growth in operating revenues of $6.7 million and $28.9
million during the three and twelve month periods ended March 31, 1998,
respectively.
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,
6
<PAGE>
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 final 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 $4.9 million or 14 percent and $15.6
million or 11 percent for the three and twelve month periods ended March 31,
1998, respectively. Sales of wireline equipment and wireline equipment
protection plans accounted for $3.5 million and $16.2 million of the overall
increases in miscellaneous revenues for the three and twelve month periods of
1998, respectively. The increases in both periods attributable to growth in
sales of wireline equipment and wireline equipment protection plans were
partially offset by decreases in revenues derived from billing and collection
services.
Total wireline operating expenses increased $23.5 million or 12 percent
and $74.4 million or 10 percent for the three and twelve month periods ended
March 31, 1998, respectively. Operating expenses for both periods of 1998
reflect 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 both periods due to the increased sales of
wireline equipment and wireline equipment protection plans, as 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.
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 to review two
interconnection decisions of the Eighth Circuit Court. The U.S. Supreme Court
has agreed to review these decisions.
7
<PAGE>
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 applicable to them. The FCC has
indicated that a further notice of proposed rulemaking will be issued during
1998 to address access charge reform for rate-of-return companies. 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 is still being evaluated.
Petitions for reconsideration of certain aspects of both the universal service
and access charge reform orders are pending at the FCC. In addition, petitions
to review parts 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. However, ALLTEL is intent
on taking advantage of the various opportunities that competition should
provide.
Communications-Wireless Operations
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Three Months Ended Twelve Months Ended
(Dollars in thousands) March 31, March 31,
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1998 1997 1998 1997
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Revenues and sales $140,629 $124,117 $559,238 $491,073
Operating income $ 40,063 $ 39,688 $178,776 $158,861
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Wireless Operations
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Wireless revenues and sales increased $16.5 million or 13 percent and
$68.2 million or 14 percent for the three and twelve month periods ended
March 31, 1998, respectively. Operating income increased $0.4 million or
1 percent and $19.9 million or 13 percent for the three and twelve month
periods of 1998, respectively. During the twelve month period ended March 31,
1998, subscriber growth remained strong as the number of wireless customers
grew to 976,769 from 843,658, an increase of 16 percent. During the first
three months of 1998, the Company placed more than 102,000 gross units in
service, compared to approximately 89,000 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
11.0 percent as of March 31, 1998. Customer churn, the average monthly rate of
customers who discontinue service, declined slightly during the first quarter
of 1998, compared to the same period of 1997.
Wireless revenues and sales increased in both periods primarily due to the
growth in its customer base. Increases in roaming and long-distance revenues,
reflecting higher volumes of network usage, also contributed to the growth in
revenues and sales in both periods. Partially offsetting the increases in
revenues and sales resulting from subscriber growth and increased roaming and
long-distance volumes were declines in the average monthly revenue per
subscriber. Average revenue per subscriber per month was $49 and $51 for the
three and twelve months ended March 31, 1998, compared to $52 and $57 for the
same periods in 1997. The declines in average revenue per subscriber primarily
reflect the migration of existing wireless customers to lower rate plans,
reductions in roaming revenue rates and the industry-wide trend of continued
penetration into lower-usage market segments. As a result of increased current
and expected future competition in its service areas, the Company has increased
its offering of monthly service plans which have lower base access rates and
include more packaged airtime minutes. Migration of existing customers to the
lower rate plans is expected to continue throughout the remainder of 1998, and
8
<PAGE>
accordingly, this trend could impact future revenue growth. Growth in revenues
and sales for the three and twelve month periods of 1998 was also favorably
impacted by decreases in uncollectible revenues, reflecting a reduction in
write-offs from bad debts.
Growth in operating income for the three month period was primarily
impacted by incremental selling costs incurred as a result of adding
approximately 13,000 more customers during the first quarter of 1998, as
compared to the same period in 1997. Operating income for the three month
period also reflects an approximate $1.0 million operating loss incurred by
the Company's start-up PCS operations. The Company began providing PCS service
in Jacksonville, Florida in March, and ALLTEL expects to begin offering PCS
service in several other markets later this year. The growth in operating
income for the twelve month period of 1998 primarily reflects the increase in
revenues and sales, partially offset by higher expenses for selling and
advertising, depreciation and other operating expenses, and the operating loss
incurred by the PCS operations. Operating income for both the three and twelve
month periods of 1998 also reflects the impact of the lower rate plans,
improved profit margins realized on the sale of wireless equipment and
reductions in losses sustained from fraud and bad debts. 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.
Information Services
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Three Months Ended Twelve Months Ended
(Dollars in thousands) March 31, March 31,
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1998 1997 1998 1997
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Revenues and sales $266,861 $217,164 $1,023,070 $949,576
Operating income $ 36,863 $ 33,664 $ 148,421 $ 70,733
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Information services' revenues and sales increased $49.7 million or 23
percent and $73.5 million or 8 percent for the three and twelve month periods
ended March 31, 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 $161.0 million or 19 percent in the twelve
month period ended March 31, 1998. Revenues and sales increased in both
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 $3.2 million or 10 percent and $77.7 million
or 110 percent for the three and twelve month periods ended March 31, 1998,
respectively. Operating income for the twelve month period ended March 31,
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 $6.5 million
or 5 percent for the twelve months ended March 31, 1998. The increases in
operating income for both 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 both 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 reflect 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.
9
<PAGE>
Product Distribution Operations
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Three Months Ended Twelve Months Ended
(Dollars in thousands) March 31, March 31,
- -------------------------------------------------------------------------------
1998 1997 1998 1997
---- ---- ---- ----
Revenues and sales $81,773 $107,590 $333,885 $448,336
Operating income $ 3,581 $ 4,417 $ 13,121 $ 21,618
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Product distribution's revenues and sales decreased $25.8 million or 24
percent and $114.5 million or 26 percent for the three and twelve month periods
ended March 31, 1998, respectively. Operating income decreased $0.8 million or
19 percent and $8.5 million or 39 percent for the three and twelve month
periods of 1998, respectively. The decreases in revenues and sales and
operating income in both periods reflect the sale of HWC completed in May 1997,
as previously discussed. Excluding the impact of HWC's operations in each
period, revenues and sales would have increased $5.7 million or 8 percent and
$21.0 million or 7 percent, and operating income would have increased $0.3
million or 9 percent and decreased $2.2 million or 15 percent for the three
and twelve month periods ended March 31, 1998, respectively.
Excluding the impact of HWC's operations, revenues and sales increased in
both periods of 1998 primarily due to growth in sales of telecommunications and
data products to non-affiliated customers, including increased retail sales of
these products at the Company's counter showrooms. These increases were
partially offset by decreases in sales to affiliates, reflecting an overall
reduction in capital expenditures by the Company's wireline subsidiaries.
Excluding the impact of HWC's operations, operating income increased in
the three month period of 1998 primarily due to the increase in revenues and
sales noted above. Although revenues and sales net of the HWC operations
increased in the twelve month period, operating income was adversely impacted
by lower gross profit margins, reflecting increased competition from other
distributors and from direct sales by manufacturers, and a reduction in
product cost rebates received from vendors. In addition, operating income
for the twelve month period of 1998 was also impacted by increased selling
and marketing expenses, reflecting additional costs incurred by the Company
to open several new counter showroom facilities during the last six months
of 1997.
Other Operations
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Three Months Ended Twelve Months Ended
(Dollars in thousands) March 31, March 31,
- -------------------------------------------------------------------------------
1998 1997 1998 1997
---- ---- ---- ----
Revenues and sales $23,252 $34,258 $107,874 $133,028
Operating income $ 1,758 $ 2,928 $ 7,618 $ 11,755
- -------------------------------------------------------------------------------
Other operations revenues and sales decreased $11.0 million or 32 percent
and $25.2 million or 19 percent for the three and twelve month periods ended
March 31, 1998, respectively. Operating income decreased $1.2 million or 40
percent and $4.1 million or 35 percent for the three and twelve month periods
of 1998, respectively.
Revenues and sales for other operations decreased in the three month period
primarily due to the loss of one large directory publishing contract. The
decrease in other operations' revenues and sales for the twelve month period
primarily resulted from a reduction in the number of directories published, as
22 fewer directories were published during the twelve month period ended
March 31, 1998, as compared to the corresponding twelve month period of 1997.
The decreases in operating income for both the three and twelve month periods
of 1998 reflect the decreases in directory publishing revenues.
10
<PAGE>
- -------------------------------------------------------------------------------
Three Months Ended Twelve Months Ended
(Dollars in thousands) March 31, March 31,
- -------------------------------------------------------------------------------
1998 1997 1998 1997
---- ---- ---- ----
Corporate expenses, as reported $6,373 $5,373 $46,794 $70,130
- -------------------------------------------------------------------------------
Corporate expenses increased $1.0 million or 19 percent and decreased
$23.3 million or 33 percent for the three month and twelve month periods ended
March 31, 1998, respectively. As previously discussed, corporate expenses for
the twelve month period of 1998 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, while corporate expenses for the twelve month period of
1997 include 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 increased
$5.1 million or 20 percent for the twelve month period ended March 31, 1998.
Net of the write-downs, the increases in corporate expenses in both the three
and twelve month periods reflect increases in advertising and employee benefit
costs.
OTHER FINANCIAL STATEMENT ITEMS
Other Income, Net
- -----------------
Other income, net increased $5.7 million or 997 percent and $9.1 million
or 506 percent for the three and twelve month periods ended March 31, 1998,
respectively. The increase in three month period reflects an increase in
capitalized interest costs and growth in equity income recognized by the
Company on its investments in wireless limited partnerships, partially offset
by an increase in the minority interest in earnings of the Company's wireless
operations by others. The increase in other income, net for the twelve month
period primarily resulted from an increase in capitalized interest costs. The
increases in capitalized interest costs in both periods reflect the acquisition
of the PCS licenses.
Interest Expense
- ----------------
Interest expense increased $1.5 million or 5 percent and $3.1 million or
2 percent for the three and twelve month periods ended March 31, 1998,
respectively. The increases in interest expense in both periods reflect
increases in the average amount of borrowings outstanding and weighted average
borrowing rates applicable to the Company's revolving credit agreement.
Income Taxes
- ------------
Income tax expense increased $13.1 million or 21 percent and $152.2 million
or 84 percent for the three and twelve month periods ended March 31, 1998,
respectively. The changes in income tax expense in both 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 $5.8 million or 10 percent
and $22.7 million or 10 percent in the three and twelve month periods of 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 and
2 percent in the three and twelve month periods ended March 31, 1998,
respectively. The decreases in both 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 acquisitions of a wireline
property and a wireless property both in the State of Georgia and by additional
shares issued under the Company's stock option plans.
11
<PAGE>
Other Financial Information
- ---------------------------
During the first quarter 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 February 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits". This pronouncement requires
additional disclosures about the changes in the benefit obligation and fair
value of plan assets arising during the reporting period, while standardizing
the disclosure requirements for pensions and other postretirement benefits.
ALLTEL will adopt the new disclosure requirements in its annual financial
statements for the year ending December 31, 1998, and will restate disclosures
for all prior periods presented to conform to the new disclosure requirements.
In March 1998, the Accounting Standards Executive Committee ("AcSEC") of
the American Institute of Certified Public Accountants issued Statement of
Position ("SOP") No. 98-01, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use". This SOP requires capitalization of
certain costs incurred with the purchase and/or development of software to be
used internally. The SOP is effective for fiscal years beginning after
December 15, 1998. Management does not expect the adoption of this SOP to have
a material impact on the financial condition or results of operations of the
Company.
In April 1998, AcSEC also issued SOP No. 98-05, "Reporting on the Costs of
Start-Up Activities". This SOP, also effective for fiscal years beginning
after December 15, 1998, requires that costs of start-up activities including
pre-operating, pre-opening and other organizational costs be expensed as
incurred. In addition, at the time the SOP is adopted, the unamortized balance
of any previously deferred start-up costs must be expensed immediately.
Management does not expect the adoption of this SOP to have a material impact
on the financial condition or results of operations of the Company.
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 not guarantees of future performance. The Company
disclaims any obligation
12
<PAGE>
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.
13
<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 16.
(b) Reports on Form 8-K:
Current Report on Form 8-K dated March 16, 1998, reporting under
Item 5, Other Events, information related to the Company's
announcement that it had entered into an Agreement and Plan of
Merger to acquire 360 Communications Company.
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.
No other reports on Form 8-K have been filed during the quarter
for which this report is filed.
14
<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 Financial Officer
May 14, 1998
15
<PAGE>
ALLTEL CORPORATION
FORM 10-Q
INDEX OF EXHIBITS
Form 10-Q Sequential
Exhibit No. Description Page No.
- ----------- ----------- --------
(10)(l)(6) Amendment No. 8 to ALLTEL Corporation 26 - 33
Profit-Sharing Plan (January 1, 1994 Restatement)
(10)(o)(6) Amendment Nos. 8 and 9 to ALLTEL Corporation 34 - 43
Thrift Plan (January 1, 1994 Restatement)
(19) Interim Report to Stockholders and 17 - 25
Notes to Consolidated Financial Statements
for the periods ended March 31, 1998
(27) Financial Data Schedule 44
for the three months ended March 31, 1998
16
<TABLE>
<CAPTION>
EXHIBIT 19
HIGHLIGHTS (UNAUDITED)
Three Months Ended March 31, Twelve Months Ended March 31,
------------------------------------ -------------------------------------
% Increase % Increase
(Dollars in thousands, except per share amounts) 1998 1997 (Decrease) 1998 1997 (Decrease)
- ------------------------------------------------ ---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
FROM CURRENT BUSINESSES1:
Revenues and sales:
Wireline $334,447 $301,176 11 $1,302,153 $1,180,444 10
Wireless 140,629 124,117 13 559,238 491,073 14
-------- -------- ---------- ----------
Total communications 475,076 425,293 12 1,861,391 1,671,517 11
Information services 266,861 217,164 23 1,023,070 862,026 19
Product distribution 81,773 76,060 8 322,568 301,587 7
Other operations 23,252 34,258 (32) 107,874 133,028 (19)
-------- -------- ---------- ----------
Total revenues and sales $846,962 $752,775 13 $3,314,903 $2,968,158 12
======== ======== ========== ==========
Operating income:
Wireline $115,655 $105,901 9 $ 456,204 $ 408,848 12
Wireless 40,063 39,688 1 178,776 158,861 13
-------- -------- ---------- ----------
Total communications 155,718 145,589 7 634,980 567,709 12
Information services 36,863 33,664 10 148,421 141,905 5
Product distribution 3,581 3,278 9 12,787 14,991 (15)
Other operations 1,758 2,928 (40) 7,618 11,755 (35)
Corporate expenses (6,373) (5,373) 19 (29,920) (24,830) 20
-------- -------- ---------- ----------
Total operating income $191,547 $180,086 6 $ 773,886 $ 711,530 9
======== ======== ========== ==========
Net income $101,278 $ 91,830 10 $ 408,345 $ 367,300 11
Basic earnings per share $.55 $.49 12 $2.20 $1.94 13
AS REPORTED:
Revenues and sales $846,962 $784,305 8 $3,326,220 $3,202,457 4
Operating income $191,547 $181,225 6 $ 757,346 $ 601,685 26
Net income $123,551 $101,708 21 $ 529,729 $ 309,372 71
Basic earnings per share $.67 $.54 24 $2.85 $1.63 75
Weighted average common shares 184,074,000 186,841,000 (1) 185,367,000 188,648,000 (2)
Current annual dividend rate per common share $1.16 $1.10 5
Capital expenditures $100,346 $145,351 (31) $ 500,568 $ 506,186 (1)
Total assets $5,842,984 $5,227,170 12
Wireline access lines 1,821,170 1,707,877 7
Wireless customers 976,769 843,658 16
Long-distance customers 315,309 154,265 104
<FN>
1 From 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>
17
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Twelve Months
Ended March 31, Ended March 31,
--------------------- -------------------------
(Dollars in thousands, except per share amounts) 1998 1997 1998 1997
- ------------------------------------------------ ---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES AND SALES:
Service revenues $717,934 $625,814 $2,793,027 $2,543,613
Product sales 129,028 158,491 533,193 658,844
-------- -------- ---------- ----------
Total revenues and sales 846,962 784,305 3,326,220 3,202,457
-------- -------- ---------- ----------
COSTS AND EXPENSES:
Operations 446,192 392,282 1,740,649 1,611,582
Cost of products sold 84,080 104,070 342,174 444,059
Depreciation and amortization 125,143 106,728 469,177 424,851
Provision to reduce carrying value of
certain assets - - 16,874 120,280
-------- -------- ---------- ----------
Total costs and expenses 655,415 603,080 2,568,874 2,600,772
-------- -------- ---------- ----------
OPERATING INCOME 191,547 181,225 757,346 601,685
Other income, net 5,141 (573) 10,950 1,806
Interest expense (33,499) (32,002) (131,678) (128,624)
Gain on disposal of assets and other 36,584 16,216 226,990 16,216
-------- -------- ---------- ----------
Income before income taxes 199,773 164,866 863,608 491,083
Income taxes 76,222 63,158 333,879 181,711
-------- -------- ---------- ----------
Net income 123,551 101,708 529,729 309,372
Preferred dividends 240 258 990 1,055
-------- -------- ---------- ----------
Net income applicable to common shares $123,311 $101,450 $ 528,739 $ 308,317
======== ======== ========== ==========
EARNINGS PER SHARE:
Basic $.67 $.54 $2.85 $1.63
Diluted $.66 $.54 $2.83 $1.62
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Twelve Months
Ended March 31, Ended March 31,
--------------------- ---------------------
(Dollars in thousands) 1998 1997 1998 1997
- ---------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
NET CASH PROVIDED FROM OPERATIONS $268,676 $246,904 $819,997 $875,961
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (100,346) (145,351) (500,568) (506,186)
Purchase of property, net of cash acquired -- (32,946) (17,687) (32,946)
Additions to capitalized software development costs (22,669) (15,513) (81,381) (80,902)
Additions to other intangible assets -- -- (146,526) --
Additions to investments (9,523) (2,375) (50,515) (27,387)
Proceeds from the sale of/return on investments 45,039 1,695 243,093 13,365
Proceeds from the sale of assets -- 104,856 95,742 104,856
Other, net 12,337 (1,238) (73,132) (57,366)
-------- -------- ------- -------
Net cash used in investing activities (75,162) (90,872) (530,974) (586,566)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends on preferred and common stock (53,590) (51,997) (207,905) (200,603)
Reductions in long-term debt (130,715) (61,383) (48,421) (43,266)
Purchase of common stock -- (32,462) (143,149) (108,066)
Preferred stock redemptions and purchases (46) (44) (875) (694)
Long-term debt issued -- -- 100,662 39,122
Common stock issued 10,868 4,246 18,642 6,140
-------- -------- -------- --------
Net cash used in financing activities (173,483) (141,640) (281,046) (307,367)
-------- -------- -------- --------
Increase (decrease) in cash and short-term investments 20,031 14,392 7,977 (17,972)
CASH AND SHORT-TERM INVESTMENTS:
Beginning of period 16,212 13,874 28,266 46,238
-------- -------- -------- --------
End of period $ 36,243 $ 28,266 $ 36,243 $ 28,266
======== ======== ======== ========
19
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31, Dec. 31, March 31,
ASSETS (Dollars in thousands) 1998 1997 1997
- ----------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and short-term investments $ 36,243 $ 16,212 $ 28,266
Accounts receivable (less allowance for
doubtful accounts of $19,301, $18,562
and $21,376, respectively) 529,664 560,928 504,878
Materials and supplies 17,491 14,237 17,893
Inventories 45,018 51,277 83,434
Prepaid expenses 34,658 23,190 29,984
---------- ---------- ----------
Total current assets 663,074 665,844 664,455
---------- ---------- ----------
Investments 987,485 775,647 736,401
Goodwill and other intangibles 608,161 606,484 438,044
PROPERTY, PLANT AND EQUIPMENT:
Wireline 4,122,004 4,068,502 3,794,874
Wireless 703,229 692,490 611,317
Information services 553,538 539,743 481,190
Other 11,488 11,008 24,132
Under construction 221,579 218,951 256,675
---------- ---------- ----------
Total property, plant and equipment 5,611,838 5,530,694 5,168,188
Less accumulated depreciation 2,434,664 2,340,242 2,085,804
---------- ---------- ----------
Net property, plant and equipment 3,177,174 3,190,452 3,082,384
---------- ---------- ----------
Other assets 407,090 395,018 305,886
---------- ---------- ----------
TOTAL ASSETS $5,842,984 $5,633,445 $5,227,170
========== ========== ==========
20
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, Dec. 31, March 31,
1998 1997 1997
---------- ---------- ----------
<S> <C> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 44,188 $ 48,028 $ 40,331
Accounts payable 215,178 237,865 213,422
Advance payments and customer deposits 102,679 84,215 67,371
Accrued taxes 127,806 74,681 112,643
Accrued dividends 55,155 55,012 52,176
Other current liabilities 124,970 137,480 145,965
---------- ---------- ----------
Total current liabilities 669,976 637,281 631,908
---------- ---------- ----------
Long-term debt 1,747,297 1,874,172 1,698,913
Deferred income taxes 768,780 665,473 600,693
Other liabilities 237,330 242,388 236,263
Preferred stock, redeemable 5,592 5,625 6,413
SHAREHOLDERS' EQUITY:
Preferred stock 9,142 9,155 9,196
Common stock 184,310 183,673 186,544
Additional capital 163,167 152,936 258,219
Unrealized holding gain on investments 425,498 300,671 285,976
Retained earnings 1,631,892 1,562,071 1,313,045
---------- ---------- ----------
Total shareholders' equity 2,414,009 2,208,506 2,052,980
---------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $5,842,984 $5,633,445 $5,227,170
========== ========== ==========
21
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Financial Statement Presentation:
The consolidated financial statements at March 31, 1998 and 1997 and for
the three 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. Merger Agreement:
On March 16, 1998, ALLTEL entered into an Agreement and Plan of Merger
(the "Merger Agreement") with 360 Communications Company ("360") and a
wholly-owned acquisition subsidiary of ALLTEL providing for the merger of
the wholly-owned acquisition subsidiary of ALLTEL into 360. Under terms of
the Merger Agreement, each outstanding share of 360 common stock will be
converted into the right to receive .74 shares of ALLTEL common stock.
Accordingly, ALLTEL will issue up to approximately 92,100,000 of its common
shares to effect the merger. Consummation of the merger is subject to
certain conditions, including the approval of the stockholders of both 360
and ALLTEL, receipt of all necessary governmental approvals and consents
and the termination or expiration of the waiting period under the Hart-
Scott-Rodino Antitrust Improvement Act of 1976, as amended. The Merger
Agreement may be terminated if it has not occurred on or before November
30, 1998, (February 28, 1999, if extended by either party as provided under
terms of the Merger Agreement), or may be terminated under other
circumstances as specified in the Merger Agreement. The merger will be
accounted for as a pooling-of-interests and is expected to occur as soon
as practical after satisfaction of all conditions set forth in the Merger
Agreement.
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 and twelve month periods ended March 31, 1998 and 1997 was as
follows:
<TABLE>
<CAPTION>
Three Months Twelve Months
(Dollars in thousands) Ended Ended
---------------------- --------------------- ---------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $123,551 $101,708 $529,729 $309,372
-------- -------- -------- --------
Other comprehensive income (loss):
Unrealized holding gains (losses) on
investments arising during the period 241,667 (108,419) 419,535 (27,138)
Reclassification adjustments for gains
included in net income (36,584) - (192,577) -
-------- -------- -------- --------
Other comprehensive income (loss) before tax 205,083 (108,419) 226,958 (27,138)
Income tax expense (benefit) 80,256 (42,528) 87,436 (19,514)
-------- -------- -------- --------
Other comprehensive income (loss) 124,827 (65,891) 139,522 (7,624)
-------- -------- -------- --------
Comprehensive income $248,378 $ 35,817 $669,251 $301,748
======== ======== ======== ========
</TABLE>
4. Gain on Disposal of Assets and Other:
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 for the three month period
ended March 31, 1998.
22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
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 and twelve month periods
ended March 31, 1998 and 1997 was as follows:
<TABLE>
<CAPTION>
Three Months Twelve Months
(Dollars in thousands) Ended Ended
---------------------- --------------------- ---------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic earnings per share:
Net income applicable to common shares $123,311 $101,450 $528,739 $308,317
Weighted average common shares outstanding
for the period 184,074 186,841 185,367 188,648
-------- -------- -------- --------
Basic earnings per share $.67 $.54 $2.85 $1.63
==== ==== ===== =====
Diluted earnings per share:
Net income applicable to common shares $123,311 $101,450 $528,739 $308,317
Adjustments for convertible securities:
Preferred stocks 46 54 198 218
-------- -------- -------- --------
Net income applicable to common shares
assuming conversion of above securities $123,357 $101,504 $528,937 $308,535
-------- -------- -------- --------
Weighted average common shares outstanding
for the period 184,074 186,841 185,367 188,648
Increase in shares which would result from:
Exercise of stock options 1,816 1,168 1,282 1,084
Conversion of convertible preferred stocks 476 544 506 552
-------- -------- -------- --------
Weighted average common shares outstanding
assuming conversion of above securities 186,366 188,553 187,155 190,284
-------- -------- -------- --------
Diluted earnings per share $.66 $.54 $2.83 $1.62
==== ==== ===== =====
</TABLE>
6. Business Segment Information:
Operating results for each of the Company's business segments for the three
and twelve month periods ended March 31, 1998 and 1997 were as follows:
<TABLE>
Three Months Twelve Months
(Dollars in thousands) Ended Ended
---------------------- --------------------- -----------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues and Sales:
Wireline $334,447 $301,176 $1,302,153 $1,180,444
Wireless 140,629 124,117 559,238 491,073
-------- -------- ---------- ----------
Total communications 475,076 425,293 1,861,391 1,671,517
Information services 266,861 217,164 1,023,070 949,576
Product distribution 81,773 107,590 333,885 448,336
Other operations 23,252 34,258 107,874 133,028
-------- -------- ---------- ----------
Total $846,962 $784,305 $3,326,220 $3,202,457
======== ======== ========== ==========
Operating Income:
Wireline $115,655 $105,901 $ 456,204 $ 408,848
Wireless 40,063 39,688 178,776 158,861
-------- -------- ---------- ----------
Total communications 155,718 145,589 634,980 567,709
Information services 36,863 33,664 148,421 70,733
Product distribution 3,581 4,417 13,121 21,618
Other operations 1,758 2,928 7,618 11,755
Corporate expenses (6,373) (5,373) (46,794) (70,130)
-------- -------- ---------- ----------
Total $191,547 $181,225 $ 757,346 $ 601,685
======== ======== ========== ==========
</TABLE>
23
<PAGE>
TO ALLTEL STOCKHOLDERS:
First Quarter Earnings From Current Businesses Increase 12 Percent
ALLTEL's first quarter 1998 results from current businesses include quarterly
revenues and earnings per share growth of 13 percent and 12 percent,
respectively, to $847 million and 55 cents per share. Quarterly results were
boosted by strong gains in our long-distance business as well as the fourth
consecutive quarter of double-digit revenue growth in our information services
business.
Revenues and operating income from current businesses for the first quarter
were $846,962,000 and $191,547,000, up 13 percent and 6 percent, respectively,
from the previous year.
We were pleased with quarterly results as we continued to deliver double-
digit earnings growth to our shareholders. Our integrated communications
business continued to exhibit good growth while rolling out new products and
developing an extended fiber infrastructure to support future growth. In
addition, our information services business continues to sign new contracts and
expand services with existing customers.
We are particularly pleased with our long-distance business, which has been
in full operation since early 1997. Despite a formidable competitive
environment, we have brought this business to a profitable level while doubling
our number of customers over the past year. In addition, we expect our extended
fiber network - which will be one of the largest fiber networks in the
Southeast - to be completed late this year, allowing us to meet the growing
demand for our local service, long distance, wireless, Internet and information
services.
At the same time, we continue to sell our Internet service and implement
competitive local exchange services in selected markets where ALLTEL has an
established presence and strong local distribution channels.
Wireless results were characterized by record growth in gross customer
additions accompanied by a corresponding rise in marketing expense. We expect
to see the revenue and income contribution from these new customers in future
quarters. Churn improved in the quarter and, revenue per customer remained
strong, declining only 3 percent year-over-year.
Information services continued to produce double-digit growth in revenues
as we expanded existing relationships and signed new contracts.
Company Announces Intent to Merge with 360 Communications
Clearly the most exciting event to occur in the first quarter was our
announcement to merge with 360 Communications Company, one of the country's
leading wireless companies. ALLTEL and 360 Communications announced March 16
plans to merge in a transaction valued at more than $6 billion. The combined
companies will create a dominant, full-service communications provider
primarily located in the Southeast and Midwest and will be one of the largest
wireless carriers in the nation.
The merger of ALLTEL and 360 creates a new, formidable competitor ideally
positioned as one of the leading growth companies in the communications
industry. Based on 1997 pro forma results, the combined companies had $4.6
billion in annual revenues, $8.6 billion in assets and $12 billion in market
capitalization. Under terms of the agreement, each 360 share will be exchanged
for .74 ALLTEL shares when the transaction is complete. Pending receipt of
timely approvals, we expect the merger to be completed in the third quarter.
24
<PAGE>
Company Announces $200 Million Contract in India
In April ALLTEL announced it was awarded a $200 million, 10-year contract by
Hughes Ispat Ltd., a consortium that will build and operate a state-of-the-art
wireless local loop telecommunications system serving Bombay, India and the
surrounding state of Maharashtra.
This contract highlights the unique combination of ALLTEL's communication
and information service expertise. In regards to telecommunications, we are
providing our intellectual capital developed over 50 years as a wireline and
wireless communications company. From the information services side, we will
install the software necessary to run the operations support system of a model
communications company featuring ALLTEL's Virtuoso customer care and billing
system.
1998 Stockholders Meeting Results
At ALLTEL's Annual Meeting of Stockholders held April 23 in Little Rock,
Michael D. Andreas, Lawrence L. Gellerstedt III, Emon A. Mahony Jr., and Ronald
Townsend were elected directors to the class whose term will expire in 2001.
Board Declares Dividends
The Company's board of directors declared regular quarterly dividends on
ALLTEL's common stock. The 29 cent dividend is payable July 3, 1998 to
stockholders of record as of June 5, 1998.
Regular quarterly dividends were also declared on all series of the
Company's preferred stock. Preferred dividends are payable June 15, 1998 to
stockholders of record as of May 22, 1998.
/s/Joe Ford
Joe T. Ford,
Chairman and Chief Executive Officer
April 23, 1998
25
AMENDMENT NO. 8
TO
ALLTEL CORPORATION PROFIT-SHARING PLAN
(January 1, 1994 Restatement)
WHEREAS, ALLTEL Corporation (the "Company") maintains the ALLTEL
Corporation Profit-Sharing Plan, as amended and restated effective
January 1, 1994, and subsequently further amended, (the "Plan"); and
WHEREAS, the Company desires further to amend the Plan;
NOW, THEREFORE, the Company hereby amends the Plan in the respects
hereinafter set forth.
1. Effective as of August 9, 1997, Section 9.04 of the Plan is
amended by adding a new subsection (m) at the end thereof to provide as
follows:
(m) In determining Years of Eligibility Service for an Employee who was
an employee of CSC Intelicom, Inc. ("CSC") immediately prior to
August 9, 1997, and became an Employee on August 9, 1997, the
Employee's period or periods of employment with CSC prior to
August 9, 1997 that would have been taken into account under the Plan
if such period or periods of employment were service with a member of
the Controlled Group, shall be counted as Years of Eligibility
Service. Notwithstanding any other provision of the Plan, there shall
be no duplication of Years of Eligibility Service under the Plan by
reason of service (or hours of service) in respect of any single
period or otherwise.
2. Effective as of January 3, 1998, Section 9.04 of the Plan is
amended by adding a new subsection (n) at the end thereof to provide as
follows:
(n) In determining Years of Eligibility Service for an Employee who was
an employee of CSC Intelicom, Inc. ("CSC") immediately prior to
January 3, 1998, and became an Employee on January 3, 1998, the
Employee's period or periods of employment with CSC prior to
January 3, 1998 that would have been taken into account under the
Plan if such period or periods of employment were service with a
member of the Controlled Group, shall be counted as Years of
Eligibility Service. Notwithstanding any other provision of the Plan,
there shall be no duplication of Years of Eligibility Service under
the Plan by reason of service (or hours of service) in respect of any
single period or otherwise.
3. Effective as of August 9, 1997, Section 9.05 of the Plan is
amended by adding a new subsection (n) at the end thereof to provide as
follows:
(n) In determining Years of Vesting Service for an Employee who was an
employee of CSC Intelicom, Inc. ("CSC") immediately prior to
26
<PAGE>
August 9, 1997, and became an Employee on August 9, 1997, the
Employee's period or periods of employment with CSC prior to
August 9, 1997, that would have been taken into account under the Plan
if such period or periods of employment were service with a member of
the Controlled Group, shall be counted as Years of Vesting Service.
Notwithstanding any other provision of the Plan, there shall be no
duplication of Years of Vesting Service under the Plan by reason of
service (or hours of service) in respect of any single period or
otherwise.
4. Effective as of January 3, 1998, Section 9.05 of the Plan is
amended by adding a new subsection (o) at the end thereof to provide as
follows:
(o) In determining Years of Vesting Service for an Employee who was an
employee of CSC Intelicom, Inc. ("CSC") immediately prior to
January 3, 1998, and became an Employee on January 3, 1998, the
Employee's period or periods of employment with CSC prior to
January 3, 1998, that would have been taken into account under the
Plan if such period or periods of employment were service with a
member of the Controlled Group, shall be counted as Years of Vesting
Service. Notwithstanding any other provision of the Plan, there shall
be no duplication of Years of Vesting Service under the Plan by
reason of service (or hours of service) in respect of any single
period or otherwise.
5. Effective as of January 19, 1997, Section 13.05 of the Plan is
amended by adding a new subsection (q) at the end thereof to provide as
follows:
(q) Each person who
(i) was an active employee of OnBank & Trust Company and became an
Employee on January 19, 1997;
(ii) met the eligibility requirements to become a Participant on or
before the last day of the 1997 Plan Year; and
(iii) is not otherwise eligible for an allocation of Employer
Contribution for the 1997 Plan Year under Section 13.04;
shall receive an allocation of Employer Contribution for the 1997 Plan
Year as provided in this subsection (q), if the Participant is
credited with at least such number of Hours of Service as the number
determined by multiplying 1,000 by a fraction the numerator of which
is the number of days of employment with the Controlled Group
completed by the Participant in the 1997 Plan Year and the denominator
of which is three hundred sixty-five (365). Subject to the last
sentence of Section 13.01, the portion of Employer Contribution
assigned to the Region including such Participants shall be specified
on the Schedule for the 1997 Plan Year and shall be allocated among
the Participants in such Region as provided in Section 13.04, but
without regard to the requirement that a Participant have a Year of
2
27
<PAGE>
Participation. Notwithstanding the provisions of Section 13.04, any
Participant who would receive an allocation of Employer Contribution
under this subsection (q) but for his transfer of employment prior to
December 31, 1997, shall be deemed to be in the Region including the
Participants eligible under this subsection (q) for the 1997 Plan
Year.
6. Effective as of January 31, 1997, Section 13.05 of the Plan is
amended by adding a new subsection (r) at the end thereof to provide as
follows:
(r) Each person who
(i) was an active employee of Frontier Cellular of Alabama, Inc.
and became an Employee on January 31, 1997;
(ii) met the eligibility requirements to become a Participant on
or before the last day of the 1997 Plan Year; and
(iii) is not otherwise eligible for an allocation of Employer
Contribution for the 1997 Plan Year under Section 13.04;
shall receive an allocation of Employer Contribution for the 1997 Plan
Year as provided in this subsection (r), if the Participant is
credited with at least such number of Hours of Service as the number
determined by multiplying 1,000 by a fraction the numerator of which
is the number of days of employment with the Controlled Group
completed by the Participant in the 1997 Plan Year and the denominator
of which is three hundred sixty-five (365). Subject to the last
sentence of Section 13.01, the portion of Employer Contribution
assigned to the Region including such Participants shall be specified
on the Schedule for the 1997 Plan Year and shall be allocated among
the Participants in such Region as provided in Section 13.04, but
without regard to the requirement that a Participant have a Year of
Participation. Notwithstanding the provisions of Section 13.04, any
Participant who would receive an allocation of Employer Contribution
under this subsection (r) but for his transfer of employment prior
to December 31, 1997, shall be deemed to be in the Region including
the Participants eligible under this subsection (r) for the 1997 Plan
Year.
7. Effective as of March 1, 1997, Section 13.05 of the Plan is
amended by adding a new subsection (s) at the end thereof to provide as
follows:
(s) Each person who
(i) was an active employee of Wilmington Savings Fund Society, FSB
and became an Employee on March 1, 1997;
(ii) met the eligibility requirements to become a Participant on or
3
28
<PAGE>
before the last day of the 1997 Plan Year; and
(iii) is not otherwise eligible for an allocation of Employer
Contribution for the 1997 Plan Year under Section 13.04;
shall receive an allocation of Employer Contribution for the 1997 Plan
Year as provided in this subsection (s), if the Participant is
credited with at least such number of Hours of Service as the number
determined by multiplying 1,000 by a fraction the numerator of which
is the number of days of employment with the Controlled Group
completed by the Participant in the 1997 Plan Year and the denominator
of which is three hundred sixty-five (365). Subject to the last
sentence of Section 13.01, the portion of Employer Contribution
assigned to the Region including such Participants shall be specified
on the Schedule for the 1997 Plan Year and shall be allocated among
the Participants in such Region as provided in Section 13.04, but
without regard to the requirement that a Participant have a Year of
Participation. Notwithstanding the provisions of Section 13.04, any
Participant who would receive an allocation of Employer Contribution
under this subsection (s) but for his transfer of employment prior to
December 31, 1997, shall be deemed to be in the Region including the
Participants eligible under this subsection (s) for the 1997 Plan
Year.
8. Effective as of April 1, 1997, Section 13.05 of the Plan is
amended by adding a new subsection (t) at the end thereof to provide as
follows:
(t) Each person who
(i) was an active employee of City National Bank and became an
Employee on April 1, 1997;
(ii) met the eligibility requirements to become a Participant on or
before the last day of the 1997 Plan Year; and
(iii) is not otherwise eligible for an allocation of Employer
Contribution for the 1997 Plan Year under Section 13.04;
shall receive an allocation of Employer Contribution for the 1997 Plan
Year as provided in this subsection (t), if the Participant is
credited with at least such number of Hours of Service as the number
determined by multiplying 1,000 by a fraction the numerator of which
is the number of days of employment with the Controlled Group
completed by the Participant in the 1997 Plan Year and the denominator
of which is three hundred sixty-five (365). Subject to the last
sentence of Section 13.01, the portion of Employer Contribution
assigned to the Region including such Participants shall be specified
on the Schedule for the 1997 Plan Year and shall be allocated among
the Participants in such Region as provided in Section 13.04, but
without regard to the requirement that a Participant have a Year of
4
29
<PAGE>
Participation. Notwithstanding the provisions of Section 13.04, any
Participant who would receive an allocation of Employer Contribution
under this subsection (t) but for his transfer of employment prior
to December 31, 1997, shall be deemed to be in the Region including
the Participants eligible under this subsection (t) for the 1997 Plan
Year.
9. Effective as of August 9, 1997, Section 13.05 of the Plan is
amended by adding a new subsection (u) at the end thereof to provide as
follows:
(u) Each person who
(i) was an active employee of CSC Intelicom, Inc. and became an
Employee on August 9, 1997;
(ii) met the eligibility requirements to become a Participant on or
before the last day of the 1997 Plan Year; and
(iii) is not otherwise eligible for an allocation of Employer
Contribution for the 1997 Plan Year under Section 13.04;
shall receive an allocation of Employer Contribution for the 1997 Plan
Year as provided in this subsection (u), if the Participant is
credited with at least such number of Hours of Service as the number
determined by multiplying 1,000 by a fraction the numerator of which
is the number of days of employment with the Controlled Group
completed by the Participant in the 1997 Plan Year and the denominator
of which is three hundred sixty-five (365). Subject to the last
sentence of Section 13.01, the portion of Employer Contribution
assigned to the Region including such Participants shall be specified
on the Schedule for the 1997 Plan Year and shall be allocated among
the Participants in such Region as provided in Section 13.04, but
without regard to the requirement that a Participant have a Year of
Participation. Notwithstanding the provisions of Section 13.04, any
Participant who would receive an allocation of Employer Contribution
under this subsection (u) but for his transfer of employment prior
to December 31, 1997, shall be deemed to be in the Region including
the Participants eligible under this subsection (u) for the 1997 Plan
Year.
10. Effective as of September 15, 1997, Section 13.05 of the Plan is
amended by adding a new subsection (v) at the end thereof to provide as
follows:
(v) Each person who
(i) was an active employee of Amcore Financial, Inc. and became an
Employee on September 15, 1997;
(ii) met the eligibility requirements to become a Participant on or
5
30
<PAGE>
before the last day of the 1997 Plan Year; and
(iii) is not otherwise eligible for an allocation of Employer
Contribution for the 1997 Plan Year under Section 13.04;
shall receive an allocation of Employer Contribution for the 1997 Plan
Year as provided in this subsection (v), if the Participant is
credited with at least such number of Hours of Service as the number
determined by multiplying 1,000 by a fraction the numerator of which
is the number of days of employment with the Controlled Group
completed by the Participant in the 1997 Plan Year and the denominator
of which is three hundred sixty-five (365). Subject to the last
sentence of Section 13.01, the portion of Employer Contribution
assigned to the Region including such Participants shall be specified
on the Schedule for the 1997 Plan Year and shall be allocated among
the Participants in such Region as provided in Section 13.04, but
without regard to the requirement that a Participant have a Year of
Participation. Notwithstanding the provisions of Section 13.04, any
Participant who would receive an allocation of Employer Contribution
under this subsection (v) but for his transfer of employment prior
to December 31, 1997, shall be deemed to be in the Region including
the Participants eligible under this subsection (v) for the 1997 Plan
Year.
11. Effective as of September 16, 1997, Section 13.05 of the Plan is
amended by adding a new subsection (w) at the end thereof to provide as
follows:
(w) Each person who
(i) was an active employee of City National Bank and became an
Employee on September 16, 1997;
(ii) met the eligibility requirements to become a Participant on or
before the last day of the 1997 Plan Year; and
(iii) is not otherwise eligible for an allocation of Employer
Contribution for the 1997 Plan Year under Section 13.04;
shall receive an allocation of Employer Contribution for the 1997 Plan
Year as provided in this subsection (w), if the Participant is
credited with at least such number of Hours of Service as the number
determined by multiplying 1,000 by a fraction the numerator of which
is the number of days of employment with the Controlled Group
completed by the Participant in the 1997 Plan Year and the denominator
of which is three hundred sixty-five (365). Subject to the last
sentence of Section 13.01, the portion of Employer Contribution
assigned to the Region including such Participants shall be specified
on the Schedule for the 1997 Plan Year and shall be allocated among
the Participants in such Region as provided in Section 13.04, but
6
31
<PAGE>
without regard to the requirement that a Participant have a Year of
Participation. Notwithstanding the provisions of Section 13.04, any
Participant who would receive an allocation of Employer Contribution
under this subsection (w) but for his transfer of employment prior
to December 31, 1997, shall be deemed to be in the Region including
the Participants eligible under this subsection (w) for the 1997 Plan
Year.
12. Effective as of October 1, 1997, Section 13.05 of the Plan is
amended by adding a new subsection (x) at the end thereof to provide as
follows:
(x) Each person who
(i) was an active employee of Eclipsys Corporation or Eclipsys
Solutions Corporation and became an Employee on
October 1, 1997;
(ii) met the eligibility requirements to become a Participant on or
before the last day of the 1997 Plan Year; and
(iii) is not otherwise eligible for an allocation of Employer
Contribution for the 1997 Plan Year under Section 13.04;
shall receive an allocation of Employer Contribution for the 1997 Plan
Year as provided in this subsection (x), if the Participant is
credited with at least such number of Hours of Service as the number
determined by multiplying 1,000 by a fraction the numerator of which
is the number of days of employment with the Controlled Group
completed by the Participant in the 1997 Plan Year and the denominator
of which is three hundred sixty-five (365). Subject to the last
sentence of Section 13.01, the portion of Employer Contribution
assigned to the Region including such Participants shall be specified
on the Schedule for the 1997 Plan Year and shall be allocated among
the Participants in such Region as provided in Section 13.04, but
without regard to the requirement that a Participant have a Year of
Participation. Notwithstanding the provisions of Section 13.04, any
Participant who would receive an allocation of Employer Contribution
under this subsection (x) but for his transfer of employment prior to
December 31, 1997, shall be deemed to be in the Region including the
Participants eligible under this subsection (x) for the 1997 Plan
Year.
13. Effective as of October 20, 1997, Section 13.05 of the Plan is
amended by adding a new subsection (y) at the end thereof to provide as
follows:
(y) Each person who
(i) was an active employee of Tucker Federal Bank and became an
Employee on October 20, 1997;
7
32
<PAGE>
(ii) met the eligibility requirements to become a Participant on or
before the last day of the 1997 Plan Year; and
(iii) is not otherwise eligible for an allocation of Employer
Contribution for the 1997 Plan Year under Section 13.04;
shall receive an allocation of Employer Contribution for the 1997 Plan
Year as provided in this subsection (y), if the Participant is
credited with at least such number of Hours of Service as the number
determined by multiplying 1,000 by a fraction the numerator of which
is the number of days of employment with the Controlled Group
completed by the Participant in the 1997 Plan Year and the denominator
of which is three hundred sixty-five (365). Subject to the last
sentence of Section 13.01, the portion of Employer Contribution
assigned to the Region including such Participants shall be specified
on the Schedule for the 1997 Plan Year and shall be allocated among
the Participants in such Region as provided in Section 13.04, but
without regard to the requirement that a Participant have a Year of
Participation. Notwithstanding the provisions of Section 13.04, any
Participant who would receive an allocation of Employer Contribution
under this subsection (y) but for his transfer of employment prior
to December 31, 1997, shall be deemed to be in the Region including
the Participants eligible under this subsection (y) for the 1997 Plan
Year.
IN WITNESS WHEREOF, the Company, by its duly authorized officer, has
caused this Amendment to be executed on this 15 day of April, 1998.
ALLTEL CORPORATION
By: /s/John L. Comparin
John L. Comparin
Title: V.P. Human Resources & Administration
8
33
AMENDMENT NO. 8
TO
ALLTEL CORPORATION THRIFT PLAN
(January 1, 1994 Restatement)
WHEREAS, ALLTEL Corporation (the "Company") maintains the ALLTEL
Corporation Thrift Plan, as amended and restated effective January 1, 1994,
and subsequently further amended, (the "Plan"); and
WHEREAS, the Company desires further to amend the Plan;
NOW, THEREFORE, the Company hereby amends the Plan in the respects
hereinafter set forth.
1. Effective as of August 9, 1997, Section 9.04 of the Plan is
amended by adding a new subsection (j) at the end thereof to provide as
follows:
(j) In determining Years of Eligibility Service for an Employee who was
an employee of CSC Intelicom, Inc. ("CSC") immediately prior to
August 9, 1997, and became an Employee on August 9, 1997, the
Employee's period or periods of employment with CSC prior to
August 9, 1997 that would have been taken into account under the Plan
if such period or periods of employment were service with a member of
the Controlled Group, shall be counted as Years of Eligibility
Service. Notwithstanding any other provision of the Plan, there shall
be no duplication of Years of Eligibility Service under the Plan by
reason of service (or hours of service) in respect of any single
period or otherwise.
2. Effective as of January 3, 1998, Section 9.04 of the Plan is
amended by adding a new subsection (k) at the end thereof to provide as
follows:
(k) In determining Years of Eligibility Service for an Employee who was
an employee of CSC Intelicom, Inc. ("CSC") immediately prior to
January 3, 1998, and became an Employee on January 3, 1998, the
Employee's period or periods of employment with CSC prior to
January 3, 1998 that would have been taken into account under the
Plan if such period or periods of employment were service with a
member of the Controlled Group, shall be counted as Years of
Eligibility Service. Notwithstanding any other provision of the Plan,
there shall be no duplication of Years of Eligibility Service under
the Plan by reason of service (or hours of service) in respect of any
single period or otherwise.
3. Effective as of January 19, 1997, Section 13.11 of the Plan is
amended by adding a new subsection (i) at the end of thereof to provide as
follows:
(i) Each person who
34
<PAGE>
(i) was an active employee of OnBank & Trust Company and became an
Employee on January 19, 1997;
(ii) met the eligibility requirements to become a Participant as
provided in subsection (b) of Section 10.01 on or before the
last day of the 1997 Plan Year; and
(iii) is not otherwise eligible for an allocation of the Employer
Qualified Nonelective Contribution for the 1997 Plan Year
under Section 13.04;
shall receive an allocation of the Employer Qualified Nonelective
Contribution for the 1997 Plan Year, as provided in this
subsection (i) if the Participant is credited with at least such
number of Hours of Service as the number determined by multiplying
1,000 by a fraction the numerator of which is the number of days
of employment with the Controlled Group completed by the Participant
in the 1997 Plan Year and the denominator of which is three hundred
sixty-five (365). Such a Participant shall receive an allocation
of the Employer Qualified Nonelective Contribution as provided in
Section 13.04, but without regard to the requirement that a
Participant have a Year of Participation.
4. Effective as of January 31, 1997, Section 13.11 of the Plan is
amended by adding a new subsection (j) at the end thereof to provide as
follows:
(j) Each person who
(i) was an active employee of Frontier Cellular of Alabama, Inc.
and became an Employee on January 31, 1997;
(ii) met the eligibility requirements to become a Participant as
provided in subsection (b) of Section 10.01 on or before the
last day of the 1997 Plan Year; and
(iii) is not otherwise eligible for an allocation of the Employer
Qualified Nonelective Contribution for the 1997 Plan Year
under Section 13.04;
shall receive an allocation of the Employer Qualified Nonelective
Contribution for the 1997 Plan Year, as provided in this
subsection (j) if the Participant is credited with at least such
number of Hours of Service as the number determined by multiplying
1,000 by a fraction the numerator of which is the number of days
of employment with the Controlled Group completed by the Participant
in the 1997 Plan Year and the denominator of which is three hundred
sixty-five (365). Such a Participant shall receive an allocation
of the Employer Qualified Nonelective Contribution as provided in
Section 13.04, but without regard to the requirement that a
Participant have a Year of Participation.
2
35
<PAGE>
5. Effective as of March 1, 1997, Section 13.11 of the Plan is
amended by adding a new subsection (k) at the end thereof to provide as
follows:
(k) Each person who
(i) was an active employee of Wilmington Savings Fund Society,
FSB and became an Employee on March 1, 1997;
(ii) met the eligibility requirements to become a Participant as
provided in subsection (b) of Section 10.01 on or before the
last day of the 1997 Plan Year; and
(iii) is not otherwise eligible for an allocation of the Employer
Qualified Nonelective Contribution for the 1997 Plan Year
under Section 13.04;
shall receive an allocation of the Employer Qualified Nonelective
Contribution for the 1997 Plan Year, as provided in this
subsection (k) if the Participant is credited with at least such
number of Hours of Service as the number determined by multiplying
1,000 by a fraction the numerator of which is the number of days
of employment with the Controlled Group completed by the Participant
in the 1997 Plan Year and the denominator of which is three hundred
sixty-five (365). Such a Participant shall receive an allocation
of the Employer Qualified Nonelective Contribution as provided in
Section 13.04, but without regard to the requirement that a
Participant have a Year of Participation.
6. Effective as of April 1, 1997, Section 13.11 of the Plan is
amended by adding a new subsection (l) at the end thereof to provide as
follows:
(l) Each person who
(i) was an active employee of City National Bank and became an
Employee on April 1, 1997;
(ii) met the eligibility requirements to become a Participant as
provided in subsection (b) of Section 10.01 on or before the
last day of the 1997 Plan Year; and
(iii) is not otherwise eligible for an allocation of the Employer
Qualified Nonelective Contribution for the 1997 Plan Year
under Section 13.04;
shall receive an allocation of the Employer Qualified Nonelective
Contribution for the 1997 Plan Year, as provided in this
subsection (k) if the Participant is credited with at least such
number of Hours of Service as the number determined by multiplying
1,000 by a fraction the numerator of which is the number of days
3
36
<PAGE>
of employment with the Controlled Group completed by the Participant
in the 1997 Plan Year and the denominator of which is three hundred
sixty-five (365). Such a Participant shall receive an allocation
of the Employer Qualified Nonelective Contribution as provided in
Section 13.04, but without regard to the requirement that a
Participant have a Year of Participation.
7. Effective as of August 9, 1997, Section 13.11 of the Plan is
amended by adding a new subsection (m) at the end thereof to provide as
follows:
(m) Each person who
(i) was an active employee of CSC Intelicom, Inc. and became an
Employee on August 9, 1997;
(ii) met the eligibility requirements to become a Participant as
provided in subsection (b) of Section 10.01 on or before the
last day of the 1997 Plan Year; and
(iii) is not otherwise eligible for an allocation of the Employer
Qualified Nonelective Contribution for the 1997 Plan Year
under Section 13.04;
shall receive an allocation of the Employer Qualified Nonelective
Contribution for the 1997 Plan Year, as provided in this
subsection (l) if the Participant is credited with at least such
number of Hours of Service as the number determined by multiplying
1,000 by a fraction the numerator of which is the number of days
of employment with the Controlled Group completed by the Participant
in the 1997 Plan Year and the denominator of which is three hundred
sixty-five (365). Such a Participant shall receive an allocation
of the Employer Qualified Nonelective Contribution as provided in
Section 13.04, but without regard to the requirement that a
Participant have a Year of Participation.
8. Effective as of September 15, 1997, Section 13.11 of the Plan is
amended by adding a new subsection (n) at the end thereof to provide as
follows:
(n) Each person who
(i) was an active employee of Amcore Financial, Inc. and became an
Employee on September 15, 1997;
(ii) met the eligibility requirements to become a Participant as
provided in subsection (b) of Section 10.01 on or before the
last day of the 1997 Plan Year; and
(iii) is not otherwise eligible for an allocation of the Employer
Qualified Nonelective Contribution for the 1997 Plan Year
under Section 13.04;
4
37
<PAGE>
shall receive an allocation of the Employer Qualified Nonelective
Contribution for the 1997 Plan Year, as provided in this
subsection (l) if the Participant is credited with at least such
number of Hours of Service as the number determined by multiplying
1,000 by a fraction the numerator of which is the number of days
of employment with the Controlled Group completed by the Participant
in the 1997 Plan Year and the denominator of which is three hundred
sixty-five (365). Such a Participant shall receive an allocation
of the Employer Qualified Nonelective Contribution as provided in
Section 13.04, but without regard to the requirement that a
Participant have a Year of Participation.
9. Effective as of September 16, 1997, Section 13.11 of the Plan is
amended by adding a new subsection (o) at the end thereof to provide as
follows:
(o) Each person who
(i) was an active employee of City National Bank and became an
Employee on September 16, 1997;
(ii) met the eligibility requirements to become a Participant as
provided in subsection (b) of Section 10.01 on or before the
last day of the 1997 Plan Year; and
(iii) is not otherwise eligible for an allocation of the Employer
Qualified Nonelective Contribution for the 1997 Plan Year
under Section 13.04;
shall receive an allocation of the Employer Qualified Nonelective
Contribution for the 1997 Plan Year, as provided in this
subsection (l) if the Participant is credited with at least such
number of Hours of Service as the number determined by multiplying
1,000 by a fraction the numerator of which is the number of days
of employment with the Controlled Group completed by the Participant
in the 1997 Plan Year and the denominator of which is three hundred
sixty-five (365). Such a Participant shall receive an allocation
of the Employer Qualified Nonelective Contribution as provided in
Section 13.04, but without regard to the requirement that a
Participant have a Year of Participation.
10. Effective as of October 1, 1997, Section 13.11 of the Plan is
amended by adding a new subsection (p) at the end thereof to provide as
follows:
(p) Each person who
(i) was an active employee of Eclipsys Corporation or Eclipsys
Solutions Corporation and became an Employee on
October 1, 1997;
5
38
<PAGE>
(ii) met the eligibility requirements to become a Participant as
provided in subsection (b) of Section 10.01 on or before the
last day of the 1997 Plan Year; and
(iii) is not otherwise eligible for an allocation of the Employer
Qualified Nonelective Contribution for the 1997 Plan Year
under Section 13.04;
shall receive an allocation of the Employer Qualified Nonelective
Contribution for the 1997 Plan Year, as provided in this
subsection (n) if the Participant is credited with at least such
number of Hours of Service as the number determined by multiplying
1,000 by a fraction the numerator of which is the number of days
of employment with the Controlled Group completed by the Participant
in the 1997 Plan Year and the denominator of which is three hundred
sixty-five (365). Such a Participant shall receive an allocation
of the Employer Qualified Nonelective Contribution as provided in
Section 13.04, but without regard to the requirement that a
Participant have a Year of Participation.
11. Effective as of October 20, 1997, Section 13.11 of the Plan is
amended by adding a new subsection (q) at the end thereof to provide as
follows:
(q) Each person who
(i) was an active employee of Tucker Federal Bank and became an
Employee on October 20, 1997;
(ii) met the eligibility requirements to become a Participant as
provided in subsection (b) of Section 10.01 on or before the
last day of the 1997 Plan Year; and
(iii) is not otherwise eligible for an allocation of the Employer
Qualified Nonelective Contribution for the 1997 Plan Year
under Section 13.04;
shall receive an allocation of the Employer Qualified Nonelective
Contribution for the 1997 Plan Year, as provided in this
subsection (m) if the Participant is credited with at least such
number of Hours of Service as the number determined by multiplying
1,000 by a fraction the numerator of which is the number of days
of employment with the Controlled Group completed by the Participant
in the 1997 Plan Year and the denominator of which is three hundred
sixty-five (365). Such a Participant shall receive an allocation
of the Employer Qualified Nonelective Contribution as provided in
Section 13.04, but without regard to the requirement that a
Participant have a Year of Participation.
IN WITNESS WHEREOF, the Company, by its duly authorized officer, has
caused this Amendment to be executed on this 15 day of April, 1998.
6
39
<PAGE>
ALLTEL CORPORATION
By: /s/John L. Comparin
John L. Comparin
Title: V.P. Human Resources & Administration
7
40
<PAGE>
AMENDMENT NO. 9
TO
ALLTEL CORPORATION THRIFT PLAN
(January 1, 1994 Restatement)
WHEREAS, ALLTEL Corporation (the "Company") maintains the ALLTEL
Corporation Thrift Plan, as amended and restated effective January 1, 1994, and
subsequently further amended, (the "Plan"); and
WHEREAS, the Company desires further to amend the Plan;
NOW THEREFORE, the Company hereby amends the Plan in the respects
hereinafter set forth:
Effective as of the Transfer Date, as Transfer Date is defined in the
Qualified Plan Transfer Agreement between WSFS Financial Corporation and ALLTEL
Information Services, Inc., dated February 20, 1998, the Plan is amended by
adding immediately following Article XXVI thereof, the following new
Article XXVII:
ARTICLE XXVIII
TRANSFER OF BENEFITS TO THE PLAN WITH RESPECT TO
CERTAIN FORMER EMPLOYEES OF
WILMINGTON SAVINGS FUND SOCIETY, FSB
27.01 Definitions
For purposes of this Article XXVII, the following definitions shall
apply:
(a) The "Effective Date" shall mean the Transfer Date as defined in the
Qualified Plan Transfer Agreement.
(b) The "Transfer Agreement" shall mean the Qualified Plan Transfer
Agreement between WSFS Financial Corporation and ALLTEL Information
Services, Inc., dated February 20, 1998.
(c) The "Transfer Accounts" shall mean the accounts transferred to the
Plan from the Transfer Plan in accordance with the provisions of
the Transfer Agreement.
(d) A "Transfer Employee" shall mean a person with respect to whom a
transfer from the Transfer Plan to the Plan is to occur pursuant to
the Transfer Agreement.
(e) The "Transfer Plan" shall mean the WSFS Financial Corporation
401(k) Savings and Retirement Plan.
41
<PAGE>
27.02 Transfer of Accounts
The Company shall direct the Trustee to accept the Transfer Accounts
from the trustee(s) of the Transfer Plan, in accordance with the
provisions of the Transfer Agreement, to be held, administered, and
disposed of by the Trustee, under the terms, conditions, and provisions
of the Plan. Except as otherwise expressly provided in this
Article XXVII, the general provisions of the Plan shall govern with
respect to the Transfer Accounts, to the extent not inconsistent with
any provision of the Transfer Plan that may not be eliminated under
Section 411(d)(6) of the Code.
27.03 Establishment of Accounts
As of the Effective Date, Separate Accounts shall be established in
accordance with the provisions of Section 11.04 in the name of each
Transfer Employee. In addition to any credits or debits to the Separate
Account of the Transfer Employees on or after the Effective Date, in
accordance with the Plan's general provisions, as of the date the
Transfer Accounts are received by the Trustee and deposited in the Trust
Fund there shall be credited to each such Separate Account or
Sub-Account, as applicable, the value of such Transfer Employee's prior
separate account or sub-account of the corresponding type under the
Transfer Plan as certified to the Plan Administrator by the plan
administrator of the Transfer Plan.
27.04 Elections, Waivers, and Beneficiary Designations
Provided that an election, waiver, or beneficiary designation has not
become irrevocable (by reason of death or otherwise), the provisions of
the Plan with respect to elections, waivers, and beneficiary
designations shall apply to the Transfer Accounts.
27.05 Outstanding Loans
Notwithstanding any other provision of the Plan to the contrary, any
outstanding loan of a Transfer Employee under the Transfer Plan shall be
repaid under the Plan by payroll deduction and otherwise continue to be
administered in accordance with its terms and the applicable provisions
of the Transfer Plan in effect at the time the loan was granted.
27.06 Vested Interest of Transfer Employees
Each Transfer Employee shall be 100% vested in the entire balance of his
separate account transferred to the Plan from the Transfer Plan.
27.07 Overriding Provisions
The provisions of this Article XXVII shall apply notwithstanding any
other provisions of the Plan, except Section 3.07, and shall override
any conflicting Plan provisions.
2
42
<PAGE>
IN WITNESS WHEREOF, the Company, by its duly authorized officer, has
caused this Amendment to be executed on this 26th day of February, 1998.
ALLTEL CORPORATION
By: /s/John L. Comparin
John L. Comparin
Title: V.P. Human Resources & Administration
3
43
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FIRST
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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 36,243
<SECURITIES> 0
<RECEIVABLES> 529,664
<ALLOWANCES> 19,301
<INVENTORY> 45,018
<CURRENT-ASSETS> 663,074
<PP&E> 5,611,838
<DEPRECIATION> 2,434,664
<TOTAL-ASSETS> 5,842,984
<CURRENT-LIABILITIES> 669,976
<BONDS> 1,747,297
5,592
9,142
<COMMON> 184,310
<OTHER-SE> 2,220,557
<TOTAL-LIABILITY-AND-EQUITY> 5,842,984
<SALES> 129,028
<TOTAL-REVENUES> 846,962
<CGS> 84,080
<TOTAL-COSTS> 655,415
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,499
<INCOME-PRETAX> 199,773
<INCOME-TAX> 76,222
<INCOME-CONTINUING> 123,551
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 123,551
<EPS-PRIMARY> .67
<EPS-DILUTED> .66
</TABLE>
