GTE CORPORATION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-2755
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
GTE CORPORATION
SAVINGS, INVESTMENT & TAX-DEFERRAL PLAN FOR HOURLY EMPLOYEES
GTE CORPORATION
ONE STAMFORD FORUM
STAMFORD, CONNECTICUT 06904
GTE CORPORATION
SAVINGS, INVESTMENT & TAX-DEFERRAL PLAN FOR HOURLY EMPLOYEES
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1994 AND DECEMBER 31, 1993
TOGETHER WITH
AUDITORS' REPORT
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Administrator of the GTE Corporation Savings, Investment &
Tax-Deferral Plan for Hourly Employees:
We have audited the accompanying Statements of Net Assets Available for
Plan Benefits with Fund Information of the GTE Corporation Savings,
Investment & Tax-Deferral Plan for Hourly Employees as of December 31, 1994
and 1993, and the related Statements of Changes in Net Assets Available for
Plan Benefits with Fund Information for the years then ended. These
financial statements are the responsibility of the Plan Administrator. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the net assets available for plan
benefits of the GTE Corporation Savings, Investment & Tax-Deferral Plan for
Hourly Employees as of December 31, 1994 and 1993, and the changes in its
net assets available for plan benefits for the years then ended in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
financial statements taken as a whole. The fund information in the
Statements of Net Assets Available for Plan Benefits and Statements of
Changes in Net Assets Available for Plan Benefits is presented for purposes
of additional analysis rather than to present the net assets available for
plan benefits and changes in net assets available for plan benefits of each
fund. The fund information has been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Stamford, Connecticut
June 9, 1995
<TABLE>
GTE CORPORATION
SAVINGS, INVESTMENT & TAX-DEFERRAL PLAN FOR HOURLY EMPLOYEES
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION
DECEMBER 31, 1994
<CAPTION>
Fidelity Fidelity
GTE U.S. Equity Broad Duration
Stock Index Collective Collective Income Loan
Portfolio Trust Fund Trust Portfolio Fund Total
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in Master Trust $18,118 $4,435 $779 $8,351 $4,121 $35,804
Receivables 1,725 34 7 47 - 1,813
NET ASSETS AVAILABLE FOR PLAN BENEFITS $19,843 $4,469 $786 $8,398 $4,121 $37,617
The accompanying notes are an integral part of this statement.
GTE CORPORATION
SAVINGS, INVESTMENT & TAX-DEFERRAL PLAN FOR HOURLY EMPLOYEES
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION
DECEMBER 31, 1993
<CAPTION>
Fidelity Fidelity
GTE U.S. Equity Broad Duration
Stock Index Collective Collective Income Loan
Portfolio Trust Fund Trust Portfolio Fund Total
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in Master Trust $72,365 $13,698 $1,422 $25,852 $4,246 $117,583
Receivables 1,968 79 15 141 - 2,203
NET ASSETS AVAILABLE FOR PLAN BENEFITS $74,333 $13,777 $1,437 $25,993 $4,246 $119,786
The accompanying notes are an integral part of this statement.
GTE CORPORATION
SAVINGS, INVESTMENT & TAX-DEFERRAL PLAN FOR HOURLY EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1994
<CAPTION>
Fidelity Fidelity
GTE U.S. Equity Broad Duration
Stock Index Collective Collective Income Loan
Portfolio Trust Fund Trust Portfolio Fund Total
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Interest and Dividends $ 1,731 $ - $ - $ - $ 78 $ 1,809
Net Investment Gain (Loss) (3,170) 256 (16) 657 - (2,273)
Contributions (Note 3):
Employee 2,268 1,808 731 4,401 - 9,208
Employer 1,631 - - - - 1,631
Transfer to Another Plan (Note 5) (55,681) (10,826) (1,297) (19,984) - (87,788)
Net Transfers Between Funds (187) 56 (25) 156 - -
Participant Loans:
Repayments 408 42 8 110 (568) -
Withdrawals (633) (46) (16) (152) 847 -
Withdrawals and Terminations (857) (598) (36) (2,783) (482) (4,756)
INCREASE (DECREASE) IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS DURING
THE YEAR (54,490) (9,308) (651) (17,595) (125) (82,169)
NET ASSETS AVAILABLE FOR PLAN
BENEFITS - beginning of year 74,333 13,777 1,437 25,993 4,246 119,786
NET ASSETS AVAILABLE FOR PLAN
BENEFITS - end of year $19,843 $ 4,469 $ 786 $ 8,398 $ 4,121 $ 37,617
The accompanying notes are an integral part of this statement.
GTE CORPORATION
SAVINGS, INVESTMENT & TAX-DEFERRAL PLAN FOR HOURLY EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1993
<CAPTION>
Fidelity Fidelity
GTE U.S. Equity Broad Duration
Stock Index Collective Collective Income Loan
Portfolio Trust Fund Trust Portfolio Fund Total
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Interest and Dividends $ 12,060 $ - $ - $ - $ 1,973 $ 14,033
Net Investment Gain 23,612 4,984 987 11,485 - 41,068
Contributions (Note 3):
Employee 17,715 4,789 753 11,747 - 35,004
Employer 1,734 - - - - 1,734
Transfer to Another Plan (Note 5) (344,041) (53,104) (9,293) (183,855) (47,509) (637,802)
Net Transfers Between Funds 374 982 175 (1,531) - -
Participant Loans:
Repayments 8,839 1,363 258 4,288 (14,748) -
Withdrawals (13,889) (1,684) (320) (5,316) 21,209 -
Withdrawals and Terminations (40,333) (5,339) (964) (22,130) 186 (68,580)
DECREASE IN NET ASSETS AVAILABLE
FOR PLAN BENEFITS DURING THE YEAR (333,929) (48,009) (8,404) (185,312) (38,889) (614,543)
NET ASSETS AVAILABLE FOR PLAN
BENEFITS - beginning of year 408,262 61,786 9,841 211,305 43,135 734,329
NET ASSETS AVAILABLE FOR PLAN
BENEFITS - end of year $ 74,333 $13,777 $1,437 $ 25,993 $ 4,246 $119,786
The accompanying notes are an integral part of this statement.
</TABLE>
GTE CORPORATION
SAVINGS, INVESTMENT & TAX-DEFERRAL PLAN FOR HOURLY EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(1) Description of the Plan:
The GTE Corporation ("GTE") Savings, Investment & Tax-Deferral Plan for
Hourly Employees ("Plan") is a defined contribution plan under the Employee
Retirement Income Security Act of 1974 ("ERISA"). The purpose of the Plan
is to provide eligible employees of GTE's subsidiaries ("Participating
Affiliates") with a convenient way to save for both medium and long-term
needs.
The Plan is available to an employee of GTE or a Participating
Affiliate who (i) is in a unit covered by a collective bargaining agreement
between the Company or one or more Participating Affiliates and a
collective bargaining agent; or (ii) is a nonunion hourly paid employee of
GTE or a Participating Affiliate if GTE or such Participating Affiliate has
agreed, by resolution of its board of directors, to be come a co-sponsor
under the Plan for such employees. "Eligible Employee" does not include
any of the following:
(a) an active participant in the GTE Hourly Savings Plan or the
GTE Savings Plan;
(b) a nonresident alien who does not receive compensation from
GTE or a Participating Affiliate, which constitutes earned
income from sources within the United States;
(c) a "leased employee" within the meaning of Section 414(n) of
the Internal Revenue Code;
(d) an individual retained by GTE or a Participating Affiliate
pursuant to a contract or agreement that specifies that the
employee is not eligible to participate in the Plan; and
(e) an individual whose basic compensation for services
rendered on behalf of GTE or a Participating Affiliate is not
paid directly by GTE or a Participating Affiliate.
An individual's active participation in the Plan shall terminate when
the individual ceases to be an eligible employee; but the individual shall
remain a participant until the entire account balance under the Plan has
been distributed or forfeited.
GTE contributions vest immediately upon death, disability, retirement,
attainment of age 65 or five years of service. For participants with less
than five years of service, GTE matching contributions vest 50% immediately
and 50% 24 months after the end of the Plan year for which the
contributions were made. Forfeitures of a participant's account due to
termination prior to 100% vesting are used to reduce GTE's future
contributions.
GTE CORPORATION
SAVINGS, INVESTMENT & TAX-DEFERRAL PLAN FOR HOURLY EMPLOYEES
NOTES TO FINANCIAL STATEMENTS - (Continued)
Through December 31, 1994, each participant directed their
contributions to be invested in any of four funds. Participants are
permitted to make changes to their investment choices once every six
months. A description of the investment choices follows:
GTE Stock Portfolio - The GTE Stock Portfolio invests
principally in GTE shares of common stock.
A portion of the GTE Stock Portfolio may
also be invested in high-grade short-term
obligations and money market instruments.
Fidelity U.S. Equity - The Fidelity U.S. Equity Index Collective
Index Collective Trust Fund invests primarily in common
Trust Fund stocks with the objective of providing
investment results that correspond to the
total return (capital changes and
income) of common stocks publicly traded
in the United States, as represented
by the Standard and Poor's 500 Composite
Stock Price Index.
Fidelity Broad Market - The Fidelity Broad Market Duration
Duration Collective Collective Trust invests in a diversified
Trust portfolio of securities that may include
U.S. Treasury and U.S. government agency
obligations, corporate, supranational,
asset-backed, and mortgage-backed debt
securities and financial futures and
options.
Income Portfolio - The Income Portfolio invests principally
in investment contracts issued by
insurance companies and banks. The Income
Portfolio may also invest in synthetic
investment contracts through the purchase
of debt obligations such as mortgage-
backed securities and asset-backed
securities that include a book value
liquidity guarantee.
GTE CORPORATION
SAVINGS, INVESTMENT & TAX-DEFERRAL PLAN FOR HOURLY EMPLOYEES
NOTES TO FINANCIAL STATEMENTS - (Continued)
A loan feature is available to participants which permits borrowing
up to 50% of a participant's vested balance subject to certain limitations.
The primary assets of the Loan Fund are the promissory notes executed by
participants who have taken loans.
Interest rates on loans are equal to the prime interest rate on the
first business day of each calendar quarter. Participant loans are
withdrawn proportionately from the participants' investment accounts. When
loans are repaid, they are reinvested according to the participants'
current investment choices. Short-term loan terms are from six months to
five years while long-term loan terms for the purchase of a primary
residence are from sixty-six months to twenty years.
The Plan participates in a master trust and, along with other plans,
owns a percentage of the assets in the master trust. These percentages are
based on a pro rata share of the trust assets. At December 31, 1994, the
Plan owned 1% of the assets in the master trust. Interest and dividends
along with net investment gains or losses are allocated to the Plan on a
daily basis based upon the Plan's participation in the various investment
funds and portfolios that comprise the master trust as a percentage of the
total participation in such funds and portfolios.
Fidelity Management Trust Company (the "Trustee") has been designated
as the Trustee under the Plan and is responsible for the investment,
reinvestment, control and disbursement of the funds of the Plan.
Administrative expenses of the Plan are paid by the Participating
Affiliates. GTE Service Corporation is the Plan administrator.
GTE reserves the right to terminate, modify, alter or amend the Plan
at any time, provided that no such change shall permit any of the funds to
be used for any purpose other than the exclusive benefit of the
participants. In the event of termination or discontinuance of the Plan by
GTE, participants' interest in their accounts will become fully vested.
An individual's active participation in the Plan shall terminate when
the individual ceases to be an eligible employee; but the individual shall
remain a participant until the entire account balance under the Plan has
been distributed or forfeited.
(2) Accounting Policies:
The accompanying financial statements have been prepared on the
accrual basis of accounting. Reclassifications of prior year data have
been made in the financial statements where appropriate to conform to the
1994 presentation.
The GTE Stock Portfolio is valued at the last published sales price
on the last business day of the year on the composite listing of the New
York Stock Exchange.
GTE CORPORATION
SAVINGS, INVESTMENT & TAX-DEFERRAL PLAN FOR HOURLY EMPLOYEES
NOTES TO FINANCIAL STATEMENTS - (Continued)
Securities listed on national securities exchanges are valued at
closing sales prices on such exchanges or, in the absence of closing sales
prices, at the mean of the last published bid and asked prices or the last
published sales price, whichever is more recent. Nonlisted securities are
valued at either the mean of the most recent published bid and asked prices
or by officers of the Trustee.
Investment contracts in the Income Portfolio are stated at contract
amount plus reinvested interest. Promissory notes in the Loan Fund are
stated at remaining principal.
Interest and dividends earned on underlying securities in the Income
Portfolio are reinvested in the fund and are not remitted to the Plan.
Accordingly, interest and dividends in are included in the net investment
gain (loss) line item in the accompanying Statements of Changes in Net
Assets Available for Plan Benefits with Fund Information.
Realized and unrealized gains and losses of Plan assets are based on
the value of the assets at the beginning of the Plan year or at time of
purchase if acquired during the year. In 1994, the GTE Stock Fund had a
realized loss on sale of investment of $1.1 million. In 1993, the GTE
Stock Fund had a realized gain on sale of investment of $0.6 million. In
1994, the GTE Stock Fund had an unrealized loss on sale of investment of
$2.1 million. In 1993, the GTE Stock Fund had an unrealized gain on sale
of investment of $23.0 million.
(3) Contributions:
The Plan is funded by contributions from participants up to a maximum
of 16% of compensation and from Participating Affiliates in shares of GTE
Common Stock equivalent in value of up to 50% of the initial 6% of the
employees' contributions not withdrawn during the Plan year. The
Participating Affiliates matching contribution is credited following the
close of each calendar year to the accounts of participants who have not
terminated their active participation. Participant contributions may be
before tax ("Elective Contributions") or from currently taxed compensation
("After-Tax Contributions"). Each participant's Elective Contribution to
the Plan for the 1994 Plan year was limited to $9,240. The total amount of
Elective Contributions, After-Tax Contributions and matching contributions
and certain forfeitures that may be allocated to a Plan participant for the
1994 Plan year was limited to the lesser of (i) $30,000 or (ii) 25% of the
participant's total compensation; and the compensation on which such
contributions was based was limited to $150,000.
Matching contributions in the form of GTE common stock into the GTE
Stock Portfolio are generally made within 60 days after the end of the Plan
year. In general, participants cannot redirect these shares into other
investment choices. Contributions for the 1994 and 1993 Plan years were
48,583 shares and 52,714 shares, respectively.
GTE CORPORATION
SAVINGS, INVESTMENT & TAX-DEFERRAL PLAN FOR HOURLY EMPLOYEES
NOTES TO FINANCIAL STATEMENTS - (Continued)
(4) Tax Status:
The Plan is a qualified profit sharing plan under Sections 401(a),
401(k) and 501 of the Internal Revenue Code of 1986, as amended (the
"Code"), and consequently is exempt from Federal income tax. Management
amended the Plan in 1995 to comply with the final rulings of the Tax Reform
Act of 1986, as amended, and has filed for a determination letter in
accordance with guidelines as issued by the Internal Revenue Service.
Management anticipates that a letter to the effect that the Plan, as
amended, qualifies under Sections 401(a), 401(k) and 501 of the Code will
be received in due course.
(5) Transfer to Another Plan:
During 1994 and 1993, net assets of Plan participants totaling $86
million and $638 million, respectively, were transferred out of the Plan to
the GTE Hourly Savings Plan as a result of labor unions negotiating to
participate in such plan.
During 1994, net assets of Plan participants totaling $2 million
were transferred from the Plan to savings plans of Citizens Utilities
Company, resulting from the sale of certain non-strategic local-exchange
telephone properties.
<TABLE>
GTE CORPORATION
SAVINGS, INVESTMENT & TAX-DEFERRAL PLAN FOR HOURLY EMPLOYEES
SCHEDULE OF INVESTMENTS IN MASTER TRUST
(thousands of dollars)
<CAPTION>
1994 1993
<S> <C> <C>
FIDELITY FUNDS:
Equity - Income Fund $ 152,380 $ 142,560
Overseas Fund 117,757 86,633
U.S. Equity Index Collective Trust Fund 112,306 131,013
Retirement Government Money Market Portfolio 78,287 45,128
Magellan Fund 307,397 282,612
Broad Market Duration Collective Trust 779 1,422
Conservative Strategy Portfolio 515,488 556,015
Conservative Growth Strategy Portfolio 221,646 228,880
Moderate Growth Strategy Portfolio 257,401 249,088
Long-Term Growth Strategy Portfolio 204,259 177,260
OTHER FUNDS:
GTE Stock Portfolio 1,196,697 1,410,604
ESOP Shares Fund 724,649 850,243
Loan Fund 176,034 173,313
Income Portfolio 8,351 25,852
Total $4,073,431 $4,360,623
The accompanying notes are an integral part of this schedule.
GTE CORPORATION
SAVINGS, INVESTMENT & TAX-DEFERRAL PLAN FOR HOURLY EMPLOYEES
Schedule of INVESTMENT INCOME IN MASTER TRUST
(thousands of dollars)
<CAPTION>
December 31, 1994 December 31, 1993
Dividends Net Investment Dividends Net Investment
& Interest Gain (Loss) & Interest Gain
<S> <C> <C> <C> <C>
FIDELITY FUNDS:
Equity - Income Fund $ 14,713 $ (14,699) $ 4,119 $ 11,122
Overseas Fund 2,004 (2,019) 1,296 11,598
U.S. Equity Index Collective Trust Fund - 1,704 - 21,397
Retirement Government Money Market Portfolio 2,494 - 917 3
Magellan Fund 11,984 (18,123) 23,172 7,337
Broad Market Duration Collective Trust - (16) - 987
Conservative Strategy Portfolio - 28,189 - 41,707
Conservative Growth Strategy Portfolio - 9,554 - 14,289
Moderate Growth Strategy Portfolio - 8,186 - 17,772
Long-Term Growth Strategy Portfolio - 6,503 - 16,366
OTHER FUNDS:
GTE Stock Portfolio 74,534 (183,332) 61,959 40,045
ESOP Shares Fund 46,000 (107,957) 45,568 8,859
Loan Fund 10,046 - 9,187 -
Income Portfolio - 657 - 11,485
Total $161,775 $(271,353) $146,218 $202,967
The accompanying notes are an integral part of this schedule.
</TABLE>
GTE CORPORATION
SAVINGS, INVESTMENT & TAX-DEFERRAL PLAN FOR HOURLY EMPLOYEES
SAVINGS & INVESTMENT MASTER TRUST
Notes to Schedules
(1) The plans participating in the Master Trust include the GTE Savings
Plan; GTE Hourly Savings Plan; GTE Corporation Savings, Investment and
Tax-Deferral Plan for Hourly Employees; AGCS Savings Plan (limited
participation) and AGCS Hourly Savings Plan (limited participation).
(2) Funds invested in contracts with insurance companies represented 68% of
the Conservative Strategy Portfolio consisting of 56 investment contracts
held with 24 insurance companies. These insurance companies, excluding
Mutual Benefit Life Insurance Company (Mutual Benefit) discussed in note 3
below and Confederation Life Insurance and Annuity Company (Confederation)
discussed in note 4 below, at December 31, 1994, were rated A- or better by
Standard & Poor's as of December 31, 1994. The investment contracts,
excluding Mutual Benefit and Confederation Life, bear interest rates
ranging from 5.28% to 9.23% and have scheduled maturities from January 3,
1995 to May 25, 2001.
(3) At December 31, 1994, the Income Portfolio had an investment contract
with Mutual Benefit which represented approximately 7% of the Conservative
Strategy Portfolio's investments and approximately 1% of the master trust
investments. At December 31, 1994, this investment is carried at contract
value of $34.9 million in the master trust. On July 15, 1991, the Board of
Directors of Mutual Benefit asked the New Jersey Department of Insurance to
place Mutual Benefit into rehabilitation. On January 15, 1993, Mutual
Benefit filed its First Amended Plan of Rehabilitation which was approved
by the Superior Court of New Jersey effective May 2, 1994. GTE opted into
the plan and will receive a new contract which preserves principal and
extends maturities, with minimum interest and premium payments over the
rehabilitation period. During 1993 and 1994, the contract was credited
with interest at a rate of 3.5%. During 1995, interest will be credited at
3.55%. In each subsequent year, the contract balance will earn an annual
rate of interest that can be adjusted each year, or more often under
certain circumstances, and will be determined by a formula based on the
investment performance of the assets which support the GTE contract.
(4) At December 31, 1994, the Income Portfolio had three investment
contracts with Confederation, which represented approximately 3% of the
Conservative Strategy Portfolio's investments and are less than 1% of the
master trust investments. On August 11, 1994, Confederation was seized by
Canada's Office of the Superintendent of Financial Institutions. As of
December 31, 1994, the workout of the appropriation of assets had not been
completed. At December 31, 1994, this investment is carried at contract
value of $13.3 million in the master trust.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Savings Plan Committee has duly caused this annual report to be signed by
the undersigned thereunto duly authorized.
GTE CORPORATION
SAVINGS, INVESTMENT & TAX-DEFERRAL PLAN
FOR HOURLY EMPLOYEES
(Name of Plan)
Date June 27, 1995 By Lawrence R. Whitman
(Lawrence R. Whitman)
Vice President and Controller
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report included in this Form 11-K into GTE
Corporation's previously filed Registration Statement on Form S-8
(File No. 33-46612).
ARTHUR ANDERSEN LLP
Stamford, Connecticut
June 23, 1995
