UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
F O R M 10 - Q
X Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period ended June 30, 1994
.............
or
Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from to
Commission File Number: 1-2755
......
GTE Corporation
......................................................
(Exact name of registrant as specified in its charter)
New York 13-1678633
..............................................................................
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Stamford Forum, Stamford, Conn. 06904
.....................................................
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 203-965-2000
............
..............................................................................
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 registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES X
NO .
GTE had 958,835,875 shares of $.05 par value common stock outstanding
at July 31, 1994.
<TABLE>
PART I. FINANCIAL INFORMATION
GTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
(In Millions)
<S> <C> <C> <C> <C>
REVENUES AND SALES $4,955 $4,916 $9,701 $9,742
COSTS AND OPERATING EXPENSES 3,745 3,878 7,373 7,603
Operating income 1,210 1,038 2,328 2,139
OTHER (INCOME) DEDUCTIONS:
Interest expense 290 326 568 664
Allowance for funds used and interest
capitalized during construction (7) (9) (14) (17)
Interest income (13) (6) (24) (22)
Other - net (48) 37 (6) 90
222 348 524 715
Income before income taxes 988 690 1,804 1,424
INCOME TAX PROVISION 393 252 705 526
Net income 595 438 1,099 898
PREFERRED STOCK DIVIDENDS OF PARENT 2 5 6 9
Net income applicable to common stock $ 593 $ 433 $1,093 $ 889
EARNINGS PER COMMON SHARE $ .62 $ .46 $1.14 $.94
DIVIDENDS DECLARED PER COMMON SHARE $ .47 $.455 $ .94 $.91
AVERAGE COMMON SHARES 956 943 955 942
The accompanying notes are an integral part of these statements.
-1-
GTE CORPORATION AND SUBSIDIARIES
CONDENSED SUMMARY OF CONSOLIDATED RESULTS
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
(In Millions)
<S> <C> <C> <C> <C>
REVENUES AND SALES:
Telephone Operations $3,984 $3,921 $7,849 $7,836
Telecommunications Products and Services 971 995 1,852 1,906
Total revenues and sales $4,955 $4,916 $9,701 $9,742
OPERATING INCOME:
Telephone Operations $1,068 $ 951 $2,093 $1,992
Telecommunications Products and Services 142 87 235 147
Operating income 1,210 1,038 2,328 2,139
OTHER (INCOME) DEDUCTIONS:
Interest expense - net 270 311 530 625
Other - net (48) 37 (6) 90
Income before income taxes 988 690 1,804 1,424
Income tax provision 393 252 705 526
Net income 595 438 1,099 898
Preferred stock dividends of parent 2 5 6 9
Net income applicable to
common stock $ 593 $ 433 $1,093 $ 889
The accompanying notes are an integral part of this summary.
-2-
</TABLE>
GTE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated
Consolidated net income for the second quarter of 1994 was $595 million, or
$.62 per share, compared with $438 million, or $.46 per share, in the second
quarter last year. The results for the second quarter of 1994 include
after-tax gains on sales of non-strategic telephone properties of $71
million, or $.07 per share, while last year's second quarter results
included a one-time after-tax charge of $46 million, or $.05 per share, for
Telephone Operations' voluntary separation programs. Excluding these
special items, earnings per share for the quarter increased 8 percent. For
the first half of 1994, consolidated net income was $1.10 billion, or $1.14
per share, compared with $898 million, or $.94 per share last year.
Excluding the impact of the non-strategic telephone properties sold and the
1993 separation charge, earnings per share for the first half increased 8
percent over 1993.
Operating income for the second quarter and first six months of 1994 rose 10
percent and 7 percent, respectively, to $1.20 billion and $2.30 billion,
exclusive of the special items and the operating income attributable to
non-strategic properties sold in 1993 and 1994.
Consolidated revenues and sales for the second quarter of 1994 totaled $4.96
billion compared with $4.92 billion in the year-ago quarter reflecting the
first quarterly revenue increase in nearly two years. Excluding revenues
from the telephone properties sold, consolidated revenues and sales
increased 3 percent in the second quarter. Substantially higher
mobile-cellular revenues and increased volumes at Telephone Operations more
than offset a $93 million reduction in government-communication sales
resulting from the completion late last year of the eight-year Mobile
Subscriber Equipment contract. Consolidated revenues and sales for the
first six months of 1994 totaled $9.70 billion compared with $9.74 billion
in the same period last year.
Telephone Operations
Telephone revenues for the second quarter and first six months of 1994
amounted to $3.98 billion and $7.85 billion, compared to $3.92 billion and
$7.84 billion, respectively, for the same periods last year. Excluding the
impact of the non-strategic properties sold, revenues for the second quarter
and first six months of 1994 increased 4 percent and 2 percent,
respectively, compared to last year. Increases in unit volumes, in both
domestic and international operations, were partially offset during the
quarter by lower, more competitive pricing. Minutes of use of GTE's
domestic local-exchange network for long-distance calling grew at an annual
rate of 9.8 percent, while total access lines increased 4.5 percent over
last year.
Effective January 1, 1994, pursuant to its agreement with the California
Public Utilities Commission ("CPUC") and its normal annual price cap filing,
GTE California, a wholly-owned subsidiary, reduced its rates by about $100
million on an annual basis.
-3-
GTE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
In July 1994, the CPUC proposed an order aimed at rebalancing local phone
companies' rates and introducing new competition in the local toll market
beginning January 1, 1995. While this order is intended to be revenue
neutral, its ultimate effect will depend, in part, on the extent to which
toll and access rate reductions result in increased calling volumes. The
CPUC is scheduled to vote on a final order in September 1994.
Excluding the results of the properties sold and the one-time separation
charge recorded in the second quarter of 1993, operating income for the
second quarter and first six months of 1994 totaled $1.06 billion and $2.07
billion, respectively, compared to $1.00 billion and $2.00 billion last
year. This improvement reflects the increased revenues and the favorable
effects of ongoing domestic cost-reduction programs. The number of access
lines per employee improved 6 percent over June 1993.
During the second quarter of 1994, GTE's Telephone Operations continued
implementation of its re-engineering plan. This plan will allow Telephone
Operations to continue to respond aggressively to competitive and regulatory
developments through reduced costs, improved service quality, competitive
prices and new product offerings. Moreover, implementation of this program
over the next three years will position GTE to accelerate delivery of a full
array of voice, video and data services.
As of June 30, 1994, access lines served by GTE's domestic and international
telephone companies operating in 32 states, Canada, the Dominican Republic
and Venezuela totaled 22.3 million.
Telecommunications Products and Services
Revenues and sales from Telecommunications Products and Services, which
includes mobile-cellular, government systems, information services,
yellow-pages directory advertising, and satellite and aircraft-passenger
communication services, totaled $971 million and $1.85 billion for the
second quarter and first six months of 1994, respectively, compared with
$995 million and $1.91 billion in the same periods last year.
Mobile-cellular revenues increased 41 percent to $404 million and $769
million in the second quarter and first six months of 1994, respectively,
compared with the same periods a year-ago. These revenue increases were
more than offset by lower government-communications sales resulting from the
completion late last year of the eight-year Mobile Subscriber Equipment
contract and changes in the timing of certain Yellow Pages directory
publications.
Operating income for the second quarter and first six months of 1994 rose to
$142 million and $235 million, respectively, compared with $87 million and
$147 million for the corresponding periods in 1993. These increases reflect
improved performance in mobile-cellular, as well as reduced depreciation
primarily related to the reduction in the carrying value of satellite
communication assets recorded at the end of 1993.
In June 1994, GTE signed a definitive agreement with GE American
Communications, Inc., for the sale of GTE Spacenet Corporation at a price
that approximates its book value. The transaction is subject to
governmental approvals and is expected to close in late 1994.
-4-
GTE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
Cellular customer growth continued at an excellent pace during the second
quarter of 1994 with a total of 160,000 new domestic customers added. This
brings total U.S. customers served to 1,878,000, a 50 percent increase
compared with 1,254,000 customers at the end of the second quarter of 1993.
During the second quarter of 1994, revenues per subscriber averaged $70 per
month, compared with $68 per month in the first quarter of 1994, and the
average of $73 per month in the second quarter last year. The current
average reflects the growth of casual users in the subscriber base.
As of June 30, 1994, GTE's U.S. mobile-cellular operations served a
population of some 53 million "POPs" (total U.S. population served times
GTE's percentage interest in the market). Outside the United States, GTE
operates mobile-cellular networks through subsidiaries in Canada, the
Dominican Republic and Venezuela, where an additional 253,000 customers are
served. During the quarter, a GTE-led consortium completed construction of
its initial network for providing cellular operations serving an area with a
population of 22 million in the northern and southern regions of Argentina.
GTE has a 23 percent ownership stake in this consortium.
Other Deductions
Interest expense, net for the second quarter and first half of 1994,
decreased 13 percent and 15 percent to $270 million and $530 million,
respectively, compared with the same periods last year. These decreases
reflect significantly reduced debt levels and the refinancing of high-coupon
long-term debt.
Other-net for the second quarter of 1994 includes pre-tax gains of $116
million resulting from sales of non-strategic local-exchange telephone
properties. These gains were partially offset by weaker results at Compania
Anonima Nacional Telefonos de Venezuela ("CANTV"), the Venezuelan telephone
company of which GTE owns a 20.4 percent share.
During the second quarter, the economic conditions in Venezuela continued to
deteriorate. The Venezuelan government instituted price controls, imposed
limitations on access to foreign currency and fixed the exchange rate for
the Bolivar. In addition, the weak economic conditions combined with
government-imposed restrictions has limited the willingness of foreign banks
to lend funds to Venezuelan companies. Accordingly, CANTV has encountered
difficulties in extending certain long-term debt agreements denominated in
foreign currencies and in making payments of principal and interest under
those agreements. CANTV's long-term debt is predominantly denominated in
foreign currency. Based on the current conditions in Venezuela, GTE does
not expect its investment in CANTV to provide any substantial contribution
to 1994 earnings.
CAPITAL RESOURCES AND LIQUIDITY
Cash from operations for the first six months of 1994 totaled $2.25 billion
compared with $2.34 billion in 1993. The decline reflects the timing of
certain payments, primarily the payment of income taxes related to the
-5-
GTE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
completion of the Mobile Subscriber Equipment contract which, for income tax
purposes, was accounted for using the completed contract method as well as
income tax payments related to gains on non-strategic properties sold in
late-1993. The decrease was partially offset by a reduction in interest
payments.
Cash used in investing activities totaled $1.17 billion compared with $756
million in the first six months of 1993. Proceeds from the sales of
businesses totaled $621 million, in the first half of 1994, reflecting the
sale of non-strategic telephone and cellular properties, and $1.02 billion,
in the first half of 1993 primarily from the divestiture of the Electrical
Products businesses.
For the first six months of 1994, capital expenditures totaled $1.74
billion, compared to $1.70 billion in the first six months last year. For
the full year 1994, capital expenditures are expected to be approximately
$4.3 billion. The majority of new investment is being made in GTE's
regulated telephone operations to meet the demands of growth, modernize
facilities and position GTE as a low-cost provider of high-quality voice,
data and video telecommunications services. Significant investments are
also being made in GTE's other businesses, such as cellular, to increase
capacity and continue to improve the quality of the network.
Cash used in financing activities for the first six months of 1994 totaled
$1.05 billion, compared with $1.61 billion in the same period last year.
Financing activities in the first six months of 1994 include the issuance of
$1.6 billion of long-term debt related primarily to the refinancing of
high-coupon redemptions begun in 1993. In April 1994, GTE redeemed its
$2.475 No Par Preferred Stock aggregating $100 million. Since the beginning
of 1992,
GTE has reduced total debt (and preferred stock) by over $4.4 billion.
Dividends and the capital requirements for GTE's businesses should continue
to be funded largely with cash from operations and the funds generated from
the employee stock purchase and dividend reinvestment plans. Cash
requirements for the implementation of the re-engineering plan at Telephone
Operations during 1994 are expected to be largely offset by cost savings.
Pursuant to definitive agreements entered into in 1993, GTE expects to
complete, during the remainder of 1994, the sale of non-strategic
local-exchange telephone properties serving over 100,000 access lines in
seven states. The net proceeds from these transactions will be used to
further reduce debt.
During the second quarter of 1994, Moody's Investors Service changed the
ratings on GTE Corporation's senior debt from A3 to Baa1 and preferred stock
from A3 to Baa2. These remain investment grade ratings. GTE's senior debt
ratings by other agencies were not changed. GTE believes that its present
investment grade credit rating and those of its subsidiaries provide it with
the financial flexibility necessary to pursue growth opportunities as they
arise. Moreover, $3.2 billion of unused bank lines of credit are available
to back up commercial paper borrowings and for working capital requirements.
-6-
GTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1994 1993
(In Millions)
ASSETS
CURRENT ASSETS:
Cash and temporary cash investments $ 360 $ 322
Receivables, less allowances
of $211 and $231 million 3,810 3,900
Inventories 728 659
Assets held for sale and other (Note 2) 686 1,067
Total Current Assets 5,584 5,948
PROPERTY, PLANT AND EQUIPMENT, at cost:
Telephone subsidiaries 43,558 43,099
Accumulated depreciation (17,343) (16,737)
26,215 26,362
Other subsidiaries 4,316 4,160
Accumulated depreciation (1,849) (1,802)
2,467 2,358
Total Property, Plant and Equipment, net 28,682 28,720
INVESTMENTS AND OTHER ASSETS:
Franchises, goodwill and other intangibles 2,093 2,102
Investments in unconsolidated companies 1,438 1,431
Deferred charges 2,689 2,462
Long-term receivables and other assets 854 912
Total Investments and Other Assets 7,074 6,907
Total Assets $41,340 $41,575
The accompanying notes are an integral part of these statements.
-7-
GTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1994 1993
(In Millions)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term obligations, including
current maturities $ 2,083 $ 1,644
Accounts and payrolls payable 1,813 1,968
Accrued taxes 968 1,108
Accrued restructuring costs 506 540
Dividends payable 470 469
Other 2,091 2,204
Total Current Liabilities 7,931 7,933
LONG-TERM DEBT 12,332 13,019
RESERVES AND DEFERRED CREDITS:
Deferred income taxes 3,032 2,807
Employee benefit obligations 4,739 4,667
Other 2,284 2,294
Total Reserves and Deferred Credits 10,055 9,768
MINORITY INTERESTS IN EQUITY OF SUBSIDIARIES 1,095 1,106
PREFERRED STOCK, subject to mandatory redemption 122 156
SHAREHOLDERS' EQUITY:
Preferred stock 11 111
Common stock - shares issued 956,765,058
and 951,761,892 48 48
Amounts paid in, in excess of par value 7,409 7,309
Reinvested earnings 2,971 2,769
Guaranteed ESOP obligation (634) (644)
Total Shareholders' Equity 9,805 9,593
Total Liabilities and Shareholders' Equity $41,340 $41,575
The accompanying notes are an integral part of these statements.
-8-
GTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30
1994 1993
(In Millions)
Cash Flows From Operations:
Net income $1,099 $ 898
Adjustments to reconcile net income
to net cash from operations:
Depreciation and amortization 1,679 1,684
Change in current assets and current
liabilities, excluding the effects of
acquisitions and dispositions (593) (156)
Deferred income taxes and other - net 65 (89)
Net cash provided from operations 2,250 2,337
Cash Flows From Investing:
Capital expenditures (1,735) (1,703)
Proceeds from sales of businesses 621 1,022
Other investing - net (53) (75)
Net cash used in investing (1,167) (756)
Cash Flows From Financing:
GTE common stock issued 237 216
Long-term debt issued 1,594 271
Long-term debt and preferred stock retirements (2,072) (1,599)
Dividends paid to shareholders of parent (902) (861)
Increase in short-term obligations,
excluding current maturities 87 351
Other financing - net 11 11
Net cash used in financing (1,045) (1,611)
Increase (decrease) in cash and temporary
cash investments 38 (30)
Cash and temporary cash investments:
Beginning of period 322 354
End of period $ 360 $ 324
Cash paid during the period for:
Interest $ 528 $ 675
Income Taxes 838 697
The accompanying notes are an integral part of these statements.
-9-
GTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION:
The unaudited Condensed Consolidated Financial Statements included
hereinhave been prepared by the Company, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. However, in the opinion of management of the Company,
the Condensed Consolidated Financial Statements include all
adjustments, consisting of normal recurring accruals, necessary to
present fairly the financial information for such periods. These
Condensed Consolidated Financial Statements should be read in
conjunction with the consolidated financial statements and the notes
thereto included in the Company's 1993 Annual Report on Form 10-K.
(2) SALE OF TELEPHONE PROPERTIES:
As part of a previously announced program to sell or trade a small
percentage of non-strategic local-exchange telephone properties, in the
second quarter of 1994, GTE sold local-exchange properties serving
292,000 access lines in 2 states for $545 million in cash. The net
proceeds from these sales were used to reduce debt. As a result of
these transactions, GTE recorded pre-tax gains of $116 million, which
increased net income by $71 million, or $.07 per share, in the second
quarter of 1994.
The accompanying Condensed Summary of Consolidated Results and the
Condensed Consolidated Statement of Income include the results of
operations, through the date of sale, of the non-strategic
local-exchange telephone properties sold during the second quarter of
1994 and at the end of 1993. For comparability, the following table
includes pro forma adjustments for each period presented to remove the
operating results of these properties and to reflect interest savings
resulting from applying the proceeds to the repayment of debt. Results
for 1994 have also been adjusted to exclude the 1994 gains realized on
the sales of these properties, while 1993 results have been adjusted to
exclude the provision for Telephone Operations' voluntary separation
programs.
-10-
GTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
(In Millions)
REVENUES AND SALES:
Telephone Operations $3,937 $3,794 $7,751 $7,571
Telecommunications Products
and Services 971 995 1,852 1,906
Total revenues and sales $4,908 $4,789 $9,603 $9,477
OPERATING INCOME:
Telephone Operations $1,058 $1,000 $2,067 $1,997
Telecommunications Products
and Services 142 87 235 147
Operating income $1,200 $1,087 $2,302 $2,144
NET INCOME APPLICABLE TO
COMMON STOCK $ 520 $ 476 $1,014 $ 919
EARNINGS PER COMMON SHARE $ .54 $ .50 $ 1.06 $ .98
GTE has also entered into definitive agreements for the sale of
additional non-strategic local-exchange telephone properties serving
over 100,000 access lines in seven states. These transactions are
subject to various government and regulatory approvals. The transfers
of ownership are expected to occur on a state-by-state basis later in
1994. The net proceeds from each of these transactions, which are
expected to exceed the net book value of the properties to be sold,
will be used to further reduce debt.
(3) INVESTMENT IN ARGENTINA:
In early 1994, a GTE-led international consortium, Compania de
Telefonos del Interior ("CTI") was successful in its bid for two
cellular licenses to provide cellular services in the north and south
interior regions of Argentina. GTE, as operator, has a leading 23
percent ownership interest in CTI, which has an initial two year
exclusivity to provide cellular services. The two contracts constitute
one of the largest cellular license awards in South America to date,
involving an area with a population of 22 million. The consortium,
will commence operations during the second half of 1994.
-11-
GTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
GTE's investment is being accounted for on the equity method.
Accordingly, GTE's investment is included in the accompanying condensed
consolidated balance sheet under the caption "Investments in
unconsolidated companies".
-12-
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K.
(11) Statement re: Calculation of earnings per common share.
(12) Statement re: Calculation of the ratio of earnings to
fixed charges.
(b) GTE filed no reports on Form 8-K during the second quarter of
1994.
-13-
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 thereunto duly authorized.
GTE Corporation
.............................
(Registrant)
Date: August 12, 1994 By William D. Wilson
.............................
William D. Wilson
Vice President and Controller
Date: August 12, 1994 By Marianne Drost
.............................
Marianne Drost
Secretary
-14-
<TABLE>
Exhibit 11
GTE CORPORATION AND SUBSIDIARIES
CALCULATION OF EARNINGS PER COMMON SHARE
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
(In Thousands)
<S> <C> <C> <C> <C>
Net income applicable to common stock $593,440 $433,509 $1,093,050 $889,478
Adjustments to net income:
Add - Preferred dividend requirements on
dilutive convertible preferred stocks 180 173 338 354
Interest expense, net of tax
effect, on employees' stock plans 381 430 541 623
Total adjustments 561 603 879 977
Adjusted consolidated net income
applicable to common stock $594,001 $434,112 $1,093,929 $890,455
Average common shares 956,193 943,283 954,942 942,268
Adjustments to common shares:
Add - Dilutive convertible preferred stocks 582 660 593 676
Employees' stock and stock option plans 2,992 3,554 2,609 2,985
Total adjustments 3,574 4,214 3,202 3,661
Adjusted average common shares 959,767 947,497 958,144 945,929
EARNINGS PER COMMON SHARE:
Primary (1) $.62 $.46 $1.14 $ .94
Fully diluted (2) $.62 $.46 $1.14 $ .94
(1) Computed by dividing net income applicable to common stock for the periods by the
average common shares outstanding. Common stock equivalents are excluded from this
computation since they do not have a 3% dilutive effect.
(2) Computed assuming conversion or exercise of those preferred stocks and stock plans that
would have a dilutive effect.
(a) Average common shares outstanding are adjusted to reflect the shares which would
be issued upon conversion of preferred stocks using the "if converted" method.
Equivalent common shares to be added to average shares for the employees' stock
plans, stock ownership plan and stock options are computed according to the
"treasury stock" method.
(b) Net income for the periods is adjusted to reflect the increase in income for
the preferred dividends declared for the periods on the convertible preferred
stocks and the interest accrued, net of tax effect, on funds received from
installments under the employees' stock plans.
</TABLE>
<TABLE>
Exhibit 12
Page 1
GTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF THE RATIO OF EARNINGS TO FIXED CHARGES
(Thousands of Dollars)
(Unaudited)
<CAPTION>
Six Months Ended Years Ended December 31
June 30, 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
Net earnings available for fixed charges:
Income from continuing operations $1,099,150 $ 989,803 $1,787,035 $1,528,102 $1,622,261
$1,550,450
Add (deduct) -
Income taxes 704,979 567,747 966,589 662,860 697,963
719,854
Interest expense 567,425 1,298,234 1,475,670 1,574,746 1,510,909
1,282,691
Capitalized interest (net of
amortization) (2,435) (3,421) (4,931) (14,791) (18,316)
(18,121)
Preferred stock dividends of subsidiaries 9,636 22,162 23,429 25,317 28,697
33,775
Additional income requirement on preferred
stock dividends of subsidiaries 6,187 12,739 12,671 11,006 12,357
15,676
Minority interests 67,726 112,335 112,425 103,626 83,471
79,554
Portion of rent expense representing
interest 66,227 153,058 196,533 210,698 206,959
199,408
2,518,895 3,152,657 4,569,421 4,101,564 4,144,301
3,863,287
Deduct - Minority interests (117,174) (236,944) (248,979) (247,284)
(224,240) (211,816)
Adjusted earnings available
for fixed charges from
continuing operations $2,401,721 $2,915,713 $4,320,442 $3,854,280 $3,920,061
$3,651,471
Fixed Charges:
Interest charges $ 567,425 $1,298,234 $1,475,670 $1,574,746 $1,510,909
$1,282,691
Preferred dividends of subsidiaries 9,636 22,162 23,429 25,317 28,697
33,775
Additional income requirement on preferred
dividends of subsidiaries 6,187 12,739 12,671 11,006 12,357
15,676
Portion of rent expense representing
interest 66,227 153,058 196,533 210,698 206,959
199,408
649,475 1,486,193 1,708,303 1,821,767 1,758,922
1,531,550
Deduct - Minority interests (34,224) (78,421) (86,504) (89,479) (91,730)
(80,287)
Adjusted fixed charges $ 615,251 $1,407,772 $1,621,799 $1,732,288 $1,667,192
$1,451,263
Ratio of Earnings to Fixed Charges - continuing
operations 3.90 2.07 2.66 2.22 2.35 2.52
Exhibit 12
Page 2
GTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF THE RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(Thousands of Dollars)
(Unaudited)
<CAPTION>
Six Months Ended Years Ended December 31
June 30, 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
Net earnings available for fixed charges
and preferred stock dividends:
Income from continuing operations $1,099,150 $ 989,803 $1,787,035 $1,528,102 $1,622,261
$1,550,450
Add (deduct) -
Income taxes 704,979 567,747 966,589 662,860 697,963
719,854
Interest expense 567,425 1,298,234 1,475,670 1,574,746 1,510,909
1,282,691
Capitalized interest (net of
amortization) (2,435) (3,421) (4,931) (14,791) (18,316)
(18,121)
Preferred stock dividends of subsidiaries 9,636 22,162 23,429 25,317 28,697
33,775
Additional income requirement on preferred
stock dividends of subsidiaries 6,187 12,739 12,671 11,006 12,357
15,676
Minority interests 67,726 112,335 112,425 103,626 83,471
79,554
Additional income requirement on preferred
stock dividends of Parent 3,916 10,246 14,241 15,991 18,802
22,085
Portion of rent expense representing
interest 66,227 153,058 196,533 210,698 206,959
199,408
2,522,811 3,162,903 4,583,662 4,117,555 4,163,103
3,885,372
Deduct - Minority interests (117,174) (236,944) (248,979) (247,284)
(224,240) (211,816)
Adjusted earnings available for fixed
charges and preferred stock
dividends - continuing operations $2,405,637 $2,925,959 $4,334,683 $3,870,271 $3,938,863
$3,673,556
Fixed Charges and preferred stock dividends:
Interest charges $ 567,425 $1,298,234 $1,475,670 $1,574,746 $1,510,909
$1,282,691
Preferred dividends of subsidiaries 9,636 22,162 23,429 25,317 28,697
33,775
Additional income requirement on preferred
dividends of subsidiaries 6,187 12,739 12,671 11,006 12,357
15,676
Preferred stock dividends of Parent 6,100 17,825 26,331 36,785 43,662
47,583
Additional income requirement on preferred
stock dividends of Parent 3,916 10,246 14,241 15,991 18,802
22,085
Portion of rent expense representing
interest 66,227 153,058 196,533 210,698 206,959
199,408
659,491 1,514,264 1,748,875 1,874,543 1,821,386
1,601,218
Deduct - Minority interests (34,224) (78,421) (86,504) (89,479) (91,730)
(80,287)
Adjusted fixed charges $ 625,267 $1,435,843 $1,662,371 $1,785,064 $1,729,656
$1,520,931
Ratio of Earnings to Fixed Charges and
preferred stock dividends -
continuing operations 3.85 2.04 2.61 2.17 2.28 2.42
</TABLE>
