UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 3, 2000
ALLTEL CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 1-4996 34-0868285
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(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
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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Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
In its Current Report on Form 8-K dated January 31, 2000, ALLTEL
Corporation ("ALLTEL" or the "Company") reported that ALLTEL, Bell Atlantic
Corporation ("Bell Atlantic"), GTE Corporation ("GTE") and Vodafone
Airtouch signed agreements to exchange wireless properties in 13 states.
Upon the closing of the transactions, Bell Atlantic or GTE will transfer to
ALLTEL interests in 27 wireless markets in Alabama, Arizona, Florida, Ohio,
New Mexico, Texas and South Carolina, representing about 14 million POPs
and more than 1.5 million wireless customers. ALLTEL will transfer to Bell
Atlantic or GTE interests in 42 wireless markets in Illinois, Indiana,
Iowa, Nevada, New York, and Pennsylvania, representing 6.3 million POPs and
more than 700,000 customers. ALLTEL will also transfer certain of its
minority investments in unconsolidated wireless properties, representing
approximately 2.6 million POPs. In addition to the transfer of wireless
assets, ALLTEL will also pay approximately $600 million in cash.
On March 30, 2000, the Federal Communications Commission ("FCC")
approved the exchange of wireless interests between ALLTEL and Bell
Atlantic in Nevada, Iowa, Arizona, New Mexico and Texas. Subsequently,
ALLTEL and Bell Atlantic completed the exchange of wireless assets in those
states. As a result, on April 3, 2000, ALLTEL began operations in Phoenix,
Tucson, Coconino, Flagstaff and Gila, Arizona; Albuquerque, New Mexico and
El Paso, Texas, while Bell Atlantic began operations in Las Vegas, Lander
and Mineral, Nevada; and Cedar Rapids, Iowa City, Waterloo, Cedar Falls,
Dubuque and Jackson, Iowa.
Consummation of the remaining transactions between ALLTEL, Bell
Atlantic and GTE are subject to certain conditions, including the receipt
of regulatory approval of the proposed Bell Atlantic and GTE merger and FCC
approval of the exchange of wireless assets in the remaining states of
Alabama, Florida, Illinois, Indiana, Ohio, Pennsylvania, New York and South
Carolina. If all necessary regulatory approvals are received and the other
contractual conditions satisfied, ALLTEL, Bell Atlantic and GTE expect to
complete the remaining transactions by mid-2000.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Not Applicable.
(b) The financial data filed herewith as part of this report as Exhibit
99.1 includes unaudited pro forma summary information for ALLTEL
after giving effect to the exchange of wireless assets with Bell
Atlantic, assuming the exchange had been effective during the periods
presented. The summary financial information is based on and should
be read in conjunction with the consolidated financial statements and
notes thereto of ALLTEL, which are incorporated by reference from
ALLTEL's Annual Report on Form 10-K for the year ended December 31,
1999. The pro forma information presented may not necessarily be
indicative of the results of operations or the financial condition
that would have been reported had the exchange been in effect during
those periods or which may be reported in the future.
ALLTEL estimates that it will realize a pretax gain for financial
reporting purposes of approximately $725.6 million on the exchange
with related tax effect of approximately $279.4 million. The net gain
of $446.2 million will be offset by expenses of approximately $30.0
million related to the acquisition, including branding and signage
costs, relocation and other expenses. In accordance with Regulation
S-X Rule 11-02(5), the net gain and other acquisition-related charges
were not reflected in the pro forma condensed income statement
included in this filing.
2
<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
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(Registrant)
By: /s/ Jeffery R. Gardner
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Jeffery R. Gardner
Senior Vice President - Chief Financial Officer
(Principal Financial Officer)
April 17, 2000
3
<PAGE>
EXHIBIT INDEX
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Exhibit
Number Description of Exhibits Page Number
- ------ ----------------------- -----------
99.1 Unaudited Pro Forma Financial Information 5
Unaudited Pro Forma Combined Condensed Balance Sheet
as of December 31, 1999 6
Unaudited Pro Forma Combined Condensed Statement of Income
for the twelve months ended December 31, 1999 7
Notes to Unaudited Pro Forma Combined Condensed
Financial Statements 8
4
Exhibit 99.1
Unaudited Pro Forma Combined Condensed Financial Statements
- -----------------------------------------------------------
The following unaudited pro forma combined condensed financial statements give
effect to the exchange of wireless properties between ALLTEL Corporation
("ALLTEL" or the "Company") and Bell Atlantic Corporation ("Bell Atlantic")
utilizing the purchase method of accounting. These pro forma statements are
presented for illustrative purposes only. The pro forma adjustments are based
upon available information and assumptions that management believes are
reasonable. The pro forma combined condensed financial statements do not purport
to represent what the results of operations or financial position of ALLTEL
would actually have been if the purchase had in fact occurred on such dates, nor
do they purport to project the results of operations or financial position of
ALLTEL for any future period or as of any date, respectively.
Under the purchase method of accounting, tangible and identifiable intangible
assets acquired are recorded at their estimated fair values. The excess of the
purchase price, including estimated fees and expenses, over the net assets
acquired has been classified as goodwill in the accompanying unaudited pro forma
combined condensed balance sheet. The estimated fair values and useful lives of
assets acquired are based on a preliminary valuation and are subject to final
valuation adjustments. Accordingly, a portion of the excess cost may be
classified as other intangibles and will be amortized over a shorter life than
the goodwill amortization period of 25 years. ALLTEL has engaged a third-party
appraisal firm to perform a study to determine the allocation of the total
purchase price to the various assets acquired. ALLTEL's management currently
believes that amounts allocated to goodwill will be amortized over a life not to
exceed 25 years while other intangibles may be amortized over shorter periods,
which would reduce net income reported by ALLTEL.
The unaudited pro forma combined condensed balance sheet was prepared by
combining ALLTEL's consolidated balance sheet as of December 31, 1999 with the
December 31, 1999 balance sheet of the Bell Atlantic properties acquired and
deducting the corresponding balance sheet of the ALLTEL properties sold. The
unaudited pro forma combined condensed balance sheet gives effect to the
exchange transactions as though they had been completed as of December 31, 1999.
The unaudited pro forma combined condensed statement of income was prepared by
combining ALLTEL's consolidated statement of income for the year ended
December 31, 1999 with the statement of income of the Bell Atlantic properties
acquired for the year ended December 31, 1999, and deducting the corresponding
statement of income for the ALLTEL properties sold. The unaudited pro forma
combined condensed statement of income gives effect as though the exchange
transactions had occurred on January 1, 1999. This unaudited pro forma combined
condensed financial data does not give effect to any restructuring costs or to
any potential cost savings or other operating efficiencies that could result
from these transactions. ALLTEL is in the process of developing a plan to
integrate the operations of the Bell Atlantic properties. As a result of this
integration plan, the Company may incur exit costs, which may be material and
would result in an increase in the total purchase price. Such exit costs cannot
be quantified as of the date of this Current Report on Form 8-K. Any exit costs
incurred will be recognized in the period in which the exit plan is approved by
management.
The unaudited financial statements of the Bell Atlantic properties acquired by
ALLTEL as of and for the year ended December 31, 1999 that are included in the
pro forma combined condensed financial statements were derived from unaudited
financial information provided by Bell Atlantic. The consolidated financial
statements of ALLTEL for the year ended December 31, 1999 are contained in
ALLTEL's Annual Report on Form 10-K for the year ended December 31, 1999 and are
incorporated by reference herein.
5
<PAGE>
ALLTEL CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1999
(Dollars in thousands)
<TABLE>
Unaudited Pro Forma
---------------------------- ----------------------------
Less: Add:
ALLTEL Bell Atlantic
ALLTEL, Properties Properties Add (Deduct)
As Reported Sold Acquired Adjustments Combined
----------- ---------- ------------- ----------- -----------
ASSETS
<S> <C> <C> <C> <C> <C>
Current assets $ 1,167,179 $ (24,558) $ 48,725 $ (66)A $ 1,191,280
Investments 1,594,029 (952) - - 1,593,077
Goodwill and other intangible assets 1,997,315 (6,851) 48,139 733,985 B 2,772,588
Property, plant and equipment:
Wireline 5,194,546 - - - 5,194,546
Wireless 3,545,778 (195,868) 522,190 - 3,872,100
Information services 775,532 - - - 775,532
Other 241,297 - - - 241,297
Under construction 533,854 (1,100) - - 532,754
----------- --------- -------- --------- -----------
Total property, plant and equipment 10,291,007 (196,968) 522,190 - 10,616,229
Less accumulated depreciation 4,556,462 (92,605) 217,179 - 4,681,036
----------- --------- -------- --------- -----------
Net property, plant and equipment 5,734,545 (104,363) 305,011 - 5,935,193
Other assets 281,135 (668) 3,293 - 283,760
----------- --------- -------- --------- -----------
Total assets $10,774,203 $(137,392) $405,168 $ 733,919 $11,775,898
=========== ========= ======== ========= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 1,193,967 $ (21,964) $135,203 $(113,239)A $ 1,245,007
32,590 C
18,450 D
Long-term debt 3,750,413 - - 625,056 E 4,375,469
Deferred income taxes 1,056,921 - - (89,746)C 967,175
Other liabilities 565,674 (279) 81 198 A 534,482
(31,192)F
Preferred stock, redeemable 1,491 - - - 1,491
Shareholders' equity:
Preferred stock 562 - - - 562
Common stock 314,258 - - - 314,258
Additional capital 973,356 (98,950) - 98,950 A 973,356
Unrealized holding gain on investments 594,130 - - - 594,130
Retained earnings 2,323,431 (16,199) - 462,736 G 2,769,968
Equity - - 269,884 (269,884)H -
----------- --------- -------- --------- -----------
Total shareholders' equity 4,205,737 (115,149) 269,884 291,802 4,652,274
----------- --------- -------- --------- -----------
Total liabilities and shareholders' equity $10,774,203 $(137,392) $405,168 $ 733,919 $11,775,898
=========== ========= ======== ========= ===========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combined financial statements.
6
<PAGE>
ALLTEL CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
(Dollars in thousands, except per share amounts)
<TABLE>
Unaudited
----------------------------
Less: Add: Pro Forma
----------------------------
ALLTEL Bell Atlantic
ALLTEL, Properties Properties Add (Deduct)
As Reported Sold Acquired Adjustments Combined
----------- ----------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Revenues and sales $6,302,271 $(165,256) $278,822 $ (2,960)I $6,412,877
Costs and expenses:
Operations 3,225,676 (78,477) 142,258 (2,960)I 3,286,497
Cost of products sold 598,796 (5,087) 22,493 - 616,202
Depreciation and amortization 862,172 (18,696) 49,255 29,359 J 922,090
Merger and integration expenses
and other charges 90,520 - - - 90,520
---------- --------- -------- --------- ----------
Total costs and expenses 4,777,164 (102,260) 214,006 26,399 4,915,309
---------- --------- -------- --------- ----------
Operating income 1,525,107 (62,996) 64,816 (29,359) 1,497,568
Equity earnings in unconsolidated partnerships 105,025 (429) - - 104,596
Minority interest in consolidated partnerships (116,647) 14,347 - - (102,300)
Other income, net 54,471 (455) 1,442 - 55,458
Interest expense (280,175) 63 (20,155) (17,348)K (317,615)
Gain on disposal of assets and other 43,071 - - - 43,071
---------- --------- -------- --------- ----------
Income before taxes 1,330,852 (49,470) 46,103 (46,707) 1,280,778
Income taxes 547,218 (19,640) - 9,866 L 537,444
---------- --------- -------- --------- ----------
Net income 783,634 (29,830) 46,103 (56,573) 743,334
Preferred dividends 889 - - - 889
---------- --------- -------- --------- ----------
Net income applicable to common shares $ 782,745 $ (29,830) $ 46,103 $ (56,573) $ 742,445
========== ========= ======== ========= ==========
Earnings per Share:
Basic $2.50 $2.37
Diluted $2.47 $2.34
Average common shares outstanding-basic (000's) 312,841 312,841
Average common shares outstanding-diluted (000's) 316,814 316,814
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combined financial statements.
7
<PAGE>
ALLTEL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1999
The unaudited pro forma financial data presented herein is not necessarily
indicative of the operating results of or financial position of ALLTEL that
would have occurred had the exchange transactions been completed at the dates
indicated, nor are they necessarily indicative of future operating results or
financial position of the Company. The purchase accounting adjustments made in
connection with the development of the unaudited pro forma condensed combined
financial statements are preliminary and have been made solely for purposes of
developing such pro forma financial information.
A. To reflect the assets and liabilities of the Bell Atlantic properties and
the liabilities and equity accounts of the ALLTEL properties that are
not part of this transaction.
B. To reflect the excess of the purchase price over the net assets acquired
as goodwill and to eliminate the unamortized goodwill for properties
transferred to Bell Atlantic.
C. To reflect the current and deferred tax impact of ALLTEL's gain on this
transaction and to reflect the appropriate deferred taxes required by
SFAS No. 109.
D. To reflect the current liability, net of tax for the estimated expenses
for branding and signage, relocation and other expenses to be incurred
related to the closing of this transaction.
E. To reflect the long-term debt issued by ALLTEL to finance the cost of
this transaction.
F. To eliminate the minority interest liability related to properties
transferred to Bell Atlantic.
G. To reflect the retained earnings impact of this transaction.
H. To reflect the elimination of the equity accounts of the Bell Atlantic
properties acquired that are not part of this transaction.
I. To eliminate the revenues and corresponding operating costs attributable
to intercompany transactions between the ALLTEL and Bell Atlantic
properties included in this transaction.
J. To reflect the annual amortization of the excess of purchase price over
the net assets acquired by ALLTEL in this transaction. For purposes of
the unaudited pro forma condensed financial statements, the excess
purchase price was allocated to goodwill and is being amortized over a
25 year life. The Company believes that when the final purchase price
allocation is completed, goodwill will be amortized over a life not to
exceed 25 years, while other identifiable intangibles may be amortized
over shorter periods, consequently reducing ALLTEL's reported net
income. A final determination of the amounts to be allocated to and
the lives attributable to identifiable intangible assets has not yet
been made.
K. To reflect the additional interest expense incurred by ALLTEL as a result
of the issuance of long-term debt as noted in Adjustment E and the
elimination of existing interest expense related to the Bell Atlantic
properties acquired in this transaction.
L. To reflect the federal and state income tax expense of the pro forma
adjustments at the statutory tax rate and to reflect federal and state
income tax expense of the acquired Bell Atlantic properties at ALLTEL's
statutory tax rate.
8
