<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 1997
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------- ----------
Commission file number 01-11779
--------
Electronic Data Systems Corporation
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-2548221
------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5400 Legacy Drive, Plano, Texas 75024-3199
-------------------------------------------
(Address of principal executive offices)
(Zip Code)
(972) 604-6000
--------------
(Registrant's telephone number, including area code)
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 .
--- ---
As of April 30, 1997, there were outstanding 489,578,386 shares of the
registrant's Common Stock, $.01 par value per share.
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
INDEX
Page No.
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Part I -- Financial Information (Unaudited)
Item 1. Financial Statements
Consolidated Statements of Income....................... 3
Condensed Consolidated Balance Sheets................... 4
Condensed Consolidated Statements of Cash Flows......... 5
Notes to Condensed Consolidated Financial Statements.... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 7
Part II -- Other Information
Item 1. Legal Proceedings................................... 11
Item 6. Exhibits and Reports on Form 8-K.................... 11
Signatures........................................................ 12
Exhibit 27 Financial Data Schedule (for SEC information only)
2
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1997 1996
---- ----
<S> <C> <C>
Systems and other contracts revenues $3,591.6 $3,366.9
-------- ---------
Costs and expenses
Cost of revenues 2,893.6 2,698.1
Selling, general, and administrative 370.7 309.9
-------- --------
Total costs and expenses 3,264.3 3,008.0
-------- --------
Operating income 327.3 358.9
Interest expense and other, net 24.0 17.0
-------- --------
Income before income taxes 303.3 341.9
Provision for income taxes 109.2 123.1
-------- --------
Net income $ 194.1 $ 218.8
-------- --------
-------- --------
Earnings per share of common stock $ 0.40 $ 0.45
-------- --------
-------- --------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except share and per share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 896.8 $ 879.9
Marketable securities 67.9 82.6
Accounts receivable, net 3,267.3 3,513.0
Inventories 144.6 141.6
Prepaids and other 294.7 391.2
--------- --------
Total current assets 4,671.3 5,008.3
--------- --------
Property and equipment, net 3,028.0 3,097.0
--------- --------
Operating and other assets
Land held for development, at cost 88.0 89.1
Investment in leases and other 1,717.0 1,591.7
Software, goodwill, and other
intangibles, net 1,333.8 1,406.8
--------- --------
Total operating and other assets 3,138.8 3,087.6
---------- ---------
Total Assets $ 10,838.1 $11,192.9
---------- ---------
--------- ---------
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 430.8 $ 465.8
Accrued liabilities 1,679.4 1,843.6
Deferred revenue 551.5 592.6
Income taxes 121.6 127.5
Current portion of long-term debt 123.5 133.3
--------- --------
Total current liabilities 2,906.8 3,162.8
--------- --------
Deferred income taxes 517.4 429.4
Long-term debt 1,727.0 2,324.3
Redeemable preferred stock of subsidiaries
and minority interest 792.7 493.3
Stockholders' equity
Preferred stock, $.01 par value;
authorized 200,000,000 shares; none issued -- --
Common stock, $.01 par value; authorized
2,000,000,000 shares; issued 489,567,324
shares at March 31,1997 and 487,590,995
shares at December 31, 1996 4.9 4.9
Additional paid-in capital 737.0 682.8
Retained earnings 4,321.6 4,200.6
Currency translation adjustments and other (169.3) (98.2)
Treasury stock, at cost, 440,488 shares at
December 31, 1996 -- (7.0)
--------- --------
Total stockholders' equity 4,894.2 4,783.1
--------- --------
Total Liabilities and Stockholders' Equity $ 10,838.1 $11,192.9
--------- --------
--------- --------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1997 1996
------ ------
<S> <C> <C>
Net cash provided by operating activities $ 546.1 $ 488.9
------ -------
Cash Flows from Investing Activities
Proceeds from sale of marketable securities 27.2 26.0
Proceeds from investment in leases and
other assets 44.8 80.8
Payments for purchase of property and
equipment (197.7) (250.5)
Payments for investments in leases and
other assets (89.8) (67.2)
Payments related to acquisitions, net
of cash acquired (6.4) (38.0)
Payments for purchase of software and
other intangibles (1.1) (29.5)
Payments for purchase of marketable securities (14.9) (21.7)
Other 16.9 9.9
------ -------
Net cash used in investing activities (221.0) (290.2)
------ -------
Cash Flows from Financing Activities
Proceeds from long-term debt 2,000.6 1,484.9
Payments on long-term debt (2,597.0) (1,236.8)
Proceeds from sale of redeemable preferred
stock of subsidiaries 339.0 --
Employee stock transactions and related tax
benefits 32.5 20.1
Dividends paid (73.1) (72.6)
------ ------
Net cash provided by (used in)
financing activities (298.0) 195.6
------ ------
Effect of exchange rate changes on cash and
cash equivalents (10.2) (7.3)
------ ------
Net increase in cash and cash equivalents 16.9 387.0
Cash and cash equivalents at beginning of period 879.9 548.9
------ ------
Cash and cash equivalents at end of period $ 896.8 $ 935.9
------ ------
------ ------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements of Electronic Data Systems Corporation ("EDS" or the
"Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information. In the opinion
of management, all adjustments (consisting of only normal recurring
items) which are necessary for a fair presentation have been included.
The results for interim periods are not necessarily indicative of results
which may be expected for any other interim period or for the full year.
For further information, refer to the consolidated financial statements
and notes thereto included in the Company's 1996 Annual Report on Form
10-K.
Certain reclassifications have been made to the 1996 unaudited
condensed consolidated financial statements to conform to the 1997
presentation.
Note 2. Earnings per Share
Earnings per share for the three months ended March 31, 1997 is
computed using the weighted average number of EDS common shares
outstanding during the period of 487.9 million shares. Common-equivalent
shares consisting of incremental shares issuable upon the exercise of
stock options and awards are excluded from the weighted average share
computation as their effect is immaterial. Earnings per share for the
three months ended March 31, 1996, when the Company was a wholly-owned
subsidiary of General Motors Corporation ("GM"), were determined based on
the relative amounts available for the payment of dividends to holders of
GM Class E common stock (the "Available Separate Consolidated Net
Income"). The Available Separate Consolidated Net Income of EDS was
equal to the Consolidated Net Income of EDS, multiplied by a fraction,
the numerator of which was the weighted average number of shares of GM
Class E common stock outstanding during the period, and the denominator
of which was the number of EDS common shares outstanding at the end of
the respective period. The comparable denominator for the calculation of
earnings per share for the three months ended March 31, 1996 was 484.4
million. Amounts calculated under the current method are not materially
different from amounts calculated under the method used during the period
GM Class E common shares were outstanding.
Note 3. Redeemable Preferred Stock of Subsidiaries
In January 1997, a consolidated subsidiary of the Company issued
200.0 million British pounds (339.0 million U.S. dollars) of redeemable
preferred stock to third parties. Dividends on such preferred shares are
cumulative from the effective date of issue at a blended fixed rate of
6.07%. The preferred shares are nonvoting and provide the holders with a
priority position with respect to any class of the issuing subsidiary's
stock in the event of dissolution. Both the holders of the preferred
stock and the Company may call such shares at any time for an amount
equal to the issue amount plus cumulative unpaid dividends.
Note 4. Accumulated Depreciation and Amortization
Property and equipment is stated net of accumulated depreciation of
$3,885.8 million and $3,892.1 million at March 31, 1997 and December 31,
1996, respectively. Additionally, software, goodwill, and other
intangibles are stated net of accumulated amortization of $1,046.7
million and $1,100.9 million at March 31, 1997 and December 31, 1996,
respectively.
6
<PAGE>
Note 5. Restructuring Activities
In the second quarter of 1996, the Company recorded numerous one-
time charges, including a $286 million charge primarily for expected
workforce reductions of approximately 4,900 employees who accepted early
retirement or were to be involuntarily terminated under a planned
workforce realignment. The total employee-related termination and early
retirement offer charges amounted to approximately $258 million, $137
million of which related to special termination benefits under the
Company's defined benefit pension plan. As of March 31, 1997, 1,743
employees have accepted the early retirement offer and approximately
2,100 employees have been involuntarily terminated. As of March 31,
1997, approximately $84 million has been paid in termination benefits
related to the involuntary termination plan and an additional $37 million
is expected to be paid in 1997.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
EDS is a provider of information technology ("IT") services, using
computer and communication technologies to meet the business needs of its
clients. EDS offers its clients a continuum of services, including
management consulting, systems development, systems integration, systems
management and process management.
Forward Looking Statements
All statements other than historical statements contained in this
Report on Form 10-Q constitute "forward looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Without
limitation, these forward looking statements include statements regarding
the Company's business transformation initiative and any related
restructuring charge and savings therefrom, the Company's Year 2000
exposure and opportunity, and future revenues from GM. Any Form 10-K,
Annual Report to Shareholders, Form 10-Q or Form 8-K of the Company may
include forward looking statements. In addition, other written or oral
statements which constitute forward looking statements have been made or
may in the future be made by the Company, including statements regarding
future operating performance, short- and long-term revenue and earnings
growth, backlog, the value of new contract signings, and industry growth
rates and the Company's performance relative thereto. These forward
looking statements rely on a number of assumptions concerning future
events, and are subject to a number of uncertainties and other factors,
many of which are outside of the Company's control, that could cause
actual results to differ materially from such statements. These include,
but are not limited to: competition in the information technology
industry and the impact of such competition on pricing, revenues and
margins; the market acceptance of new product or service offerings that
offer higher margins than traditional product or service offerings and
costs associated with the development and marketing of such offerings;
the financial performance of current and future customer contracts,
including the financial performance of EDS' contracts with GM; the
degree to which the Company can improve productivity; general economic
conditions; the degree to which business entities continue to outsource
information technology and business processes; the cost of attracting and
retaining highly skilled personnel; and, with respect to the Company's
Year 2000 exposure and opportunity, the Company's ability to capitalize
on new business opportunities and the interpretation of information
technology contracts the Company has with its clients.
The Company disclaims any intention or obligation to update or
revise any forward looking statements whether as a result of new
information, future events or otherwise.
7
<PAGE>
Split-Off of EDS
On June 7, 1996, GM and EDS consummated a split-off (the "Split-
Off") of EDS to the holders of GM's Class E common stock in a transaction
that is tax-free for U.S. federal income tax purposes. In connection
with the Split-Off, GM and EDS entered into a Master Services Agreement
(the "Master Services Agreement") with respect to IT services to be
provided after the Split-Off, and a special payment of $500.0 million was
made by EDS to GM (the "Special Intercompany Payment").
Business Transformation Initiative
In connection with the announcement of its first quarter earnings on
April 24, 1997, EDS announced that it is implementing an enterprise-wide
business transformation initiative to reduce its costs, streamline its
organizational structure, and align its strategy, services, and delivery
with market opportunities. The first stage of the initiative, the
reduction of costs, is expected to be implemented beginning in the second
quarter of 1997 through the elimination of positions and the cessation of
certain non-revenue producing projects. As a result of this business
transformation initiative, EDS expects to recognize a restructuring
charge. This charge is expected to be recognized principally in the
second quarter of 1997. EDS anticipates that the cash savings that
result from the initiative in 1997 will offset amounts paid for people-
related charges.
Restructuring Charge and Asset Writedowns
In the second quarter of 1996, the Company recorded numerous one-
time charges including a $286 million charge primarily for expected
workforce reductions of approximately 4,900 employees who accepted early
retirement or were to be involuntarily terminated under a planned
workforce realignment. The total employee-related termination and early
retirement offer charges amounted to approximately $258 million, $137
million of which relates to special termination benefits, including
amounts under the Company's defined benefit pension plan. As of March
31, 1997, 1,743 employees have accepted the early retirement offer and
approximately 2,100 employees have been involuntarily terminated. As of
March 31, 1997, approximately $84 million has been paid in termination
benefits related to the involuntary termination plan and an additional
$37 million is expected to be paid in 1997. At the same time as the
restructuring, the Company wrote down certain of its assets by
approximately $564 million, $60 million of which were charged to cost of
revenues, and recognized approximately $45 million of expenses directly
associated with Split-Off activities. For further information, reference
is made to the consolidated financial statements and notes thereto in the
Company's Annual Report on Form 10-K for the year ended December 31,
1996.
New Accounting Standard
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 (SFAS 128), Earnings
per Share, which establishes new standards for computing and presenting
earnings per share. SFAS 128 is effective for financial statements
issued for periods ending after December 15, 1997 and requires
restatement of all prior-period earnings per share data. Early
application of SFAS 128 is not permitted. The Company's adoption of the
provisions of SFAS 128 will result in the dual presentation of basic and
diluted earnings per share on the Company's income statement. Diluted
earnings per share as calculated under SFAS 128 is not expected to
materially differ from primary earnings per share amounts previously
presented.
Results of Operations
Revenues. Total systems and other contracts revenues for the
quarter ended March 31, 1997, rose $224.7 million, or 7%, over the
corresponding quarter in 1996 to $3,591.6 million. Revenues from non-
GM clients for the quarter ended March 31, 1997, rose 7% to $2,572.6
million compared to $2,404.7
8
<PAGE>
million for the same period in 1996. Revenues from GM increased
$56.8 million, or 6%, to $1,019.0 million compared with $962.2
million for the corresponding period in 1996. Although revenues
from GM increased slightly in the first quarter of 1997, it is
expected that for the year they will remain at approximately
the same level as in 1996. Revenues from non-GM clients comprised 72%
and 71% of total revenues for the three months ended March 31, 1997 and
1996, respectively.
Costs and Expenses. Cost of revenues as a percentage of systems and
other contracts revenues increased slightly to 81% for the three months
ended March 31, 1997, compared with 80% for the corresponding period in
1996. Selling, general and administrative expenses as a percentage of
systems and other contracts revenues were 10% for the three months ended
March 31, 1997, up from 9% in the corresponding period in 1996. Costs
and expenses have increased primarily due to higher labor costs. Labor
costs, including both employees and outside contractors, increased 11%
for the first quarter of 1997 when compared with the corresponding period
in 1996. The Company is addressing these higher labor costs through the
business transformation initiative discussed above as well as other
initiatives. The majority of cost savings from these initiatives are
expected to be realized beginning in the second half of 1997.
The Company believes that the Year 2000 issue (the cost of making
its internal systems Year 2000 compliant as well as the cost to the
Company of making its clients' systems Year 2000 compliant where it is
obligated to do so) will not have a material adverse effect on its
results of operations. In addition, the Company believes that the Year
2000 issue presents significant market opportunities for revenue growth.
Interest expense and other, net. Interest expense and other, net
increased $7.0 million in the first quarter of 1997 to $24.0 million,
compared with $17.0 million in 1996. The primary reason for the increase
in 1997 was interest associated with amounts borrowed to finance the
Special Intercompany Payment made to GM in the second quarter of 1996.
Net Income. For the three month period ended March 31, 1997, the
Company's net income decreased 11% to $194.1 million from $218.8 million
for the corresponding period of the prior year. Earnings per share of
common stock declined from $.45 to $.40 for the first quarter of 1997
compared to the first quarter of 1996.
Return on assets decreased to 3.7% (8.9% excluding the impact on net
income and assets of the restructuring and other related charges recorded
in the second quarter of 1996 as discussed above) for the twelve-month
period ended March 31, 1997, compared with 9.8% for the corresponding
period ended March 31, 1996. Return on stockholders' equity decreased to
8.1% (19.5% excluding the impact on net income and equity of the
restructuring and other related charges discussed above) for the twelve-
month period ended March 31, 1997, compared to 21.3% for the comparable
period ended March 31 1996. The Company's effective tax rate remained
constant at 36% for the three months ended March 31, 1997 and 1996.
The Company and its clients may, from time to time, modify their
contractual arrangements. For client contracts accounted for under the
percentage of completion method, such changes would be reflected in
results of operations as a cumulative change in accounting estimate in
the period the revisions are determined.
Seasonality and Inflation. The Company's revenues vary over the
calendar year, with the fourth quarter generally reflecting the highest
revenues for the year due to certain services that are purchased more
heavily in the fourth quarter as a result of the spending patterns of
several clients. In addition, revenues have generally increased from
quarter to quarter as a result of new business added throughout the year.
The Company believes that inflation generally had little effect on its
results of operations for the periods presented.
9
<PAGE>
Liquidity and Capital Resources
At March 31, 1997, the Company held cash and cash equivalents of
$896.8 million, had working capital of $1,764.5 million, and a current
ratio of 1.6-to-1. This compares to cash equivalents of $879.9 million,
$1,845.5 million in working capital and a current ratio of 1.5-to-1 at
December 31, 1996.
The Company's capitalization at March 31, 1997, consisted of
$1,727.0 million in long-term debt, less current portion, and $4,894.2
million in stockholders' equity. Total debt (which includes redeemable
preferred stock of subsidiaries)was $2,590.6 million at March 31, 1997,
compared with total debt of $2,897.8 million at December 31, 1996. The
total debt-to-capital ratio (which includes current portion of long-term
debt and redeemable preferred stock of subsidiaries as components of
capital) was 34.6% at March 31, 1997, and 37.7% at December 31, 1996.
The ratio of long-term debt to capital was 33% at March 31, 1997 and 36%
at December 31, 1996. At March 31, 1997, the Company had unused
uncommitted short-term lines of credit totaling $694.7 million and unused
committed lines of credit of $2,500.0 million. The unused committed
lines of credit of $2,500.0 million serve as a backup facility for
commercial paper borrowings. The balance of commercial paper borrowings
at March 31, 1997 was approximately $940 million. At March 31, 1997, and
December 31, 1996, the Company had total committed lines of credit of
$2,521.3 million.
Cash flows from operations increased $57.2 million during the first
quarter of 1997 to $546.1 million compared with the first quarter of 1996
due primarily to increased cash collections on accounts receivable. Cash
used in investing activities during the first quarter of 1997 was $221.0
million compared with $290.2 million in the corresponding period of last
year. Net cash used in financing activities was $298.0 million in the
first quarter of 1997 compared with $195.6 million provided in the
corresponding period of last year.
In January 1997, a consolidated subsidiary of the Company issued
200.0 million British pounds (339.0 million U.S. dollars) of redeemable
preferred stock to third parties. Holders of such preferred shares have
the right to redeem such shares in 2004 for cash equal to the issue
amount plus cumulative unpaid dividends. Dividends on such preferred
shares are cumulative from the effective date of issue at a blended fixed
rate of 6.07%.
The Company paid cash dividends totaling $73.1 million for the first
three months of 1997, and $72.6 million for the same period in 1996.
The Company expects that its principal uses of funds for the
foreseeable future will be for capital expenditures, debt repayment, and
working capital. Capital expenditures are expected to consist of
purchases of computer and telecommunications equipment, buildings and
facilities, land, and software, as well as acquisitions. Capital
expenditures for 1997 are expected to be approximately $1,200 million to
$1,700 million. However, actual capital expenditures are somewhat
dependent on acquisition and joint venture activities, as well as capital
requirements for new business. The Company anticipates that cash flows
from operations and unused borrowing capacity under its existing lines of
credit will provide sufficient funds to meet its needs for at least the
next year.
The IT services agreements existing between GM and EDS prior to the
Split-Off provided for GM to pay EDS on the 15th day of the month in
which services are provided with respect to a substantial portion of
services. Under the IT services agreements signed at the time of the
Split-Off, there will be a transition over a two-year period, beginning
in 1997, to payment on the 20th day of the month following service for
all agreements that do not already have payment terms at least that
favorable to GM. These revised payment terms are expected to result in
an increase in EDS' working capital requirements. EDS will obtain the
funds for this working capital impact through borrowings under its
existing commercial paper or bank credit facilities. EDS funded the
Special Intercompany Payment through borrowings under its existing
commercial paper facilities. EDS currently anticipates that it may
seek to refinance such commercial paper or bank borrowings as part
of its general plan to extend maturities of its indebtedness.
10
<PAGE>
The competitive environment and changing market forces are
increasing the capital intensity of the Company's business. Increasing
amounts of capital will be required in order to make investments in
acquisitions, joint ventures, and strategic alliances in other parts of
the information industry and in new product development. In order to
provide the funds necessary for its future acquisition and expansion
goals, the Company expects that it might incur, from time to time,
additional bank financing and/or issue equity or debt securities,
depending on market and other conditions. In addition, information
technology client contracts frequently now require front-end investments
in computers and telecommunications equipment, software, and other
property and equipment. For these reasons, the Company's ability to
continue to access the capital markets on an efficient basis will become
increasingly important to its ability to compete effectively.
PART II
ITEM 1. LEGAL PROCEEDINGS
Reference is made to EDS' Annual Report on Form 10-K for the year
ended December 31, 1996 for information regarding certain litigation in
connection with the split-off of EDS from GM.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
------- -------------------------------------------------
27 Financial Data Schedule (for SEC information only)
(b) Reports on Form 8-K
During the quarter ended March 31, 1997, EDS filed a Current
Report on Form 8-K dated February 4, 1997 reporting a press
release under Item 5 - Other Events and Item 7 - Exhibits.
11
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
SIGNATURES
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 hereunto duly authorized.
ELECTRONIC DATA SYSTEMS
CORPORATION
-------------------------------
(Registrant)
Date: May 5, 1997 By /s/ Joseph M. Grant
-------------------------------
(Joseph M. Grant, Executive
Vice President and Chief
Financial Officer)
Date: May 5, 1997 By /s/ H. Paulett Eberhart
-------------------------------
(H. Paulett Eberhart, Vice
President and Controller)
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 897
<SECURITIES> 68
<RECEIVABLES> 3,432
<ALLOWANCES> 165
<INVENTORY> 145
<CURRENT-ASSETS> 4,671
<PP&E> 6,914
<DEPRECIATION> 3,886
<TOTAL-ASSETS> 10,838
<CURRENT-LIABILITIES> 2,907
<BONDS> 2,502
0
0
<COMMON> 742
<OTHER-SE> 4,152
<TOTAL-LIABILITY-AND-EQUITY> 10,838
<SALES> 3,592
<TOTAL-REVENUES> 3,592
<CGS> 0
<TOTAL-COSTS> 2,894
<OTHER-EXPENSES> 371
<LOSS-PROVISION> 4
<INTEREST-EXPENSE> 42
<INCOME-PRETAX> 303
<INCOME-TAX> 109
<INCOME-CONTINUING> 194
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 194
<EPS-PRIMARY> .40
<EPS-DILUTED> .40
</TABLE>
