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, 1995
GTE HOURLY SAVINGS PLAN
GTE CORPORATION
ONE STAMFORD FORUM
STAMFORD, CONNECTICUT 06904
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Administrator of the
GTE Hourly Savings Plan:
We have audited the accompanying Statements of Net Assets Available for
Plan Benefits with Fund Information of the GTE Hourly Savings Plan as of
December 31, 1995 and 1994, and the related Statement of Changes in Net
Assets Available for Plan Benefits with Fund Information for the year ended
December 31, 1995. 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 Hourly Savings Plan as of December 31, 1995 and 1994, and the
changes in net assets available for plan benefits for the year ended
December 31, 1995 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 Statement 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 17, 1996
<TABLE>
GTE HOURLY SAVINGS PLAN
STATEMENT of Net Assets Available for Plan Benefits, WITH FUND INFORMATION
DECEMBER 31, 1995
(thousands of dollars)
<CAPTION>
Investments
in Master Trust Receivables Total
<S> <C> <C> <C>
FIDELITY FUNDS:
Equity - Income Fund $ 31,875 $ 131 $ 32,006
Overseas Fund 14,626 86 14,712
U.S. Equity Index Collective Trust Fund 37,357 64 37,421
Retirement Government Money Market Portfolio 37,246 386 37,632
Magellan Fund 81,713 391 82,104
Conservative Strategy Portfolio 105,449 114 105,563
Conservative Growth Strategy Portfolio 31,200 112 31,312
Moderate Growth Strategy Portfolio 38,309 177 38,486
Long-Term Growth Strategy Portfolio 30,828 151 30,979
OTHER FUNDS:
GTE Stock Portfolio 479,457 21,540 500,997
Loan Fund 56,859 - 56,859
Total $944,919 $23,152 $968,071
The accompanying notes are an integral part of this financial statement.
GTE HOURLY SAVINGS PLAN
STATEMENT of Net Assets Available for Plan Benefits, WITH FUND INFORMATION
DECEMBER 31, 1994
(thousands of dollars)
<CAPTION>
Investments
in Master Trust Receivables Total
<S> <C> <C> <C>
FIDELITY FUNDS:
Equity - Income Fund $ 21,585 $ 124 $ 21,709
Overseas Fund 15,607 114 15,721
U.S. Equity Index Collective Trust Fund 27,341 50 27,391
Retirement Government Money Market Portfolio 24,943 446 25,389
Magellan Fund 49,209 331 49,540
Conservative Strategy Portfolio 111,685 124 111,809
Conservative Growth Strategy Portfolio 25,342 118 25,460
Moderate Growth Strategy Portfolio 26,981 166 27,147
Long-Term Growth Strategy Portfolio 22,156 141 22,297
OTHER FUNDS:
GTE Stock Portfolio 320,831 20,788 341,619
Loan Fund 54,384 - 54,384
Total $700,064 $22,402 $722,466
The accompanying notes are an integral part of this financial statement.
Page 1 of 2
GTE HOURLY SAVINGS PLAN
STATEMENT of Changes in Net Assets Available for Plan Benefits, WITH FUND INFORMATION
For the Year Ended DECEMBER 31, 1995
(thousands of dollars)
<CAPTION>
Fidelity Funds
U.S. Equity Retirement
Equity- Index Government Conservative
Income Overseas Collective Money Market Magellan Strategy
Fund Fund Trust Fund Portfolio Fund Portfolio
<S> <C> <C> <C> <C> <C> <C>
Interest and Dividends $ 1,779 $ 336 $ - $ 1,743 $ 4,657 $ -
Net Investment Gain (Note 2) 5,318 886 9,976 - 14,039 8,709
Contributions (Note 3):
Employee 3,376 2,613 1,525 11,311 9,592 3,389
Employer - - - - - -
Net Transfers From (To) Other Plans (120) (45) 324 (126) (111) 675
Net Transfers Between Funds 1,605 (4,199) 1,201 121 7,353 (3,958)
Participant Loans:
Repayments 815 625 402 5,366 2,397 888
Withdrawals (753) (438) (816) (2,558) (2,033) (2,378)
Withdrawals and Terminations (1,723) (787) (2,582) (3,614) (3,330) (13,571)
INCREASE (DECREASE) IN NET ASSETS AVAILABLE
FOR PLAN BENEFITS DURING THE YEAR 10,297 (1,009) 10,030 12,243 32,564 (6,246)
NET ASSETS AVAILABLE FOR PLAN BENEFITS
AT BEGINNING OF YEAR 21,709 15,721 27,391 25,389 49,540 111,809
NET ASSETS AVAILABLE FOR PLAN BENEFITS
AT END OF YEAR $32,006 $14,712 $37,421 $37,632 $82,104 $105,563
The accompanying notes are an integral part of this financial statement.
Page 2 of 2
GTE HOURLY SAVINGS PLAN
STATEMENT of Changes in Net Assets Available for Plan Benefits, WITH FUND INFORMATION
For the Year Ended DECEMBER 31, 1995
(thousands of dollars)
<CAPTION>
Fidelity Funds Other Funds
Conservative Moderate Long-Term
Growth Growth Growth GTE
Strategy Strategy Strategy Stock Loan
Portfolio Portfolio Portfolio Portfolio Fund Total
<S> <C> <C> <C> <C> <C> <C>
Interest and Dividends $ - $ - $ - $ 20,211 $ 3,546 $ 32,272
Net Investment Gain (Note 2) 4,056 6,510 5,385 145,630 - 200,509
Contributions (Note 3):
Employee 3,171 4,652 3,917 12,651 - 56,197
Employer - - - 21,475 - 21,475
Net Transfers From (To) Other Plans (20) (31) 12 56 147 761
Net Transfers Between Funds 546 1,806 330 (4,805) - -
Participant Loans:
Repayments 764 1,074 951 13,125 (26,407) -
Withdrawals (818) (1,018) (820) (16,948) 28,580 -
Withdrawals and Terminations (1,847) (1,654) (1,093) (32,017) (3,391) (65,609)
INCREASE (DECREASE) IN NET ASSETS AVAILABLE
FOR PLAN BENEFITS DURING THE YEAR 5,852 11,339 8,682 159,378 2,475 245,605
NET ASSETS AVAILABLE FOR PLAN BENEFITS
AT BEGINNING OF YEAR 25,460 27,147 22,297 341,619 54,384 722,466
NET ASSETS AVAILABLE FOR PLAN BENEFITS
AT END OF YEAR $31,312 $38,486 $30,979 $500,997 $56,859 $968,071
The accompanying notes are an integral part of this financial statement.
</TABLE>
GTE CORPORATION
GTE HOURLY SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(1) Description of the Plan:
Eligibility
The GTE Corporation ("GTE") GTE Hourly Savings Plan (the "Plan") is a
defined contribution plan under the Employee Retirement Income Security Act
of 1974 ("ERISA"). The Plan provides eligible employees of GTE and its
subsidiaries ("Participating Affiliates") with a convenient way to save for
both medium and long-term needs.
The Plan is generally available to any eligible employee as defined by
the plan document, of GTE or a Participating Affiliate, who either is in a
unit covered by a collective bargaining agreement that provides for
participation in the Plan, or is a nonunion hourly-paid employee that GTE or
a Participating Affiliate has agreed, by resolution of its board of
directors, to co-sponsor under the Plan. To the extent expressly provided
in any written separation policy of GTE or a Participating Affiliate,
eligible employee also includes any former employee of GTE or a
Participating Affiliate who is receiving salary continuation payments
pursuant to the separation policy.
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.
Vesting and Investment Choices
Matching contributions vest immediately upon death, disability,
retirement, attainment of age 65 or five years of service with GTE or a
Participating Affiliate. For participants with less than five years of
service, 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.
Each participant directs their contributions to be invested in one of
the current investment options: five Fidelity funds, four Fidelity strategy
portfolios, the GTE stock portfolio or in any combination of these funds and
portfolios. Participants are permitted to make changes to their investment
choices on a daily basis. A description of the investment choices follows:
a. Fidelity Equity-Income Fund - invests primarily in corporate
common and preferred stock, with up to 20% of the fund invested
in bonds and convertible securities.
b. Fidelity Overseas Fund - invests primarily in securities of
issuers whose principal activities are outside the United States
and also invests in public and private bonds (both foreign
and domestic), bank deposits and money market instruments
denominated in U.S. dollars or foreign currencies.
GTE CORPORATION
GTE HOURLY SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS - (Continued)
c. Fidelity U.S. Equity Index Collective Trust Fund - invests
in commingled funds seeking to provide results that correspond
to the total return performance of common stocks publicly traded
in the United States as represented by the Standard & Poor's 500
Composite Stock Price Index.
d. Fidelity Retirement Government Money Market Portfolio -
invests in high-quality money market instruments and obligations
issued or guaranteed by the United States government or its
agencies or instrumentalities.
e. Fidelity Magellan Fund - invests primarily in stocks and
securities convertible into common stock of United States and
foreign companies and in high yield securities, options and
futures contracts related to securities in the portfolio.
f. Conservative Strategy Portfolio - invests 100% of its assets
in an underlying portfolio of fixed-income securities, including
investment contracts and bonds.
g. Conservative Growth Strategy Portfolio - invests
approximately 75% of its assets in a portfolio of fixed-income
securities, including investment contracts and bonds, with the
remaining 25% invested in a portfolio of United States equities.
h. Moderate Growth Strategy Portfolio - invests approximately
50% of its assets in a portfolio of United States equities. The
remaining 50% is invested in a portfolio of fixed-income
securities, including investment contracts and bonds.
i. Long-Term Growth Strategy Portfolio - invests approximately
75% of its assets in a portfolio of equity securities consisting
of a combination of United States equities (50%) and
international (25%). The remaining 25% is invested in a
portfolio of fixed-equities income securities, including
investment contracts and bonds.
j. GTE Stock Portfolio - invests principally in GTE common
stock, but may also invest a portion in short-term money market
instruments.
The Savings Plan Committee may, at its sole discretion, eliminate,
and/or change the underlying composition of any of the investment options,
and may add other funds as a current investment option.
Participant Loans
A loan feature is available which permits participants to borrow up to
50% of their vested balance, subject to certain limitations. The primary
assets of the Loan Fund are promissory notes executed by participants who
have taken loans.
GTE CORPORATION
GTE HOURLY SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS - (Continued)
Interest rates on loans are equal to the prime interest rate at the
first business day of each calendar quarter. Participant loans are
withdrawn proportionately from the participants' investment accounts. When
loans are repaid, the principal and interest amounts are reinvested
according to the participants' current investment decision. Short-term
loans are from six months to five years while long-term loans for the
purchase of a primary residence are from sixty-six months to twenty years.
Master Trust
The Plan participates in the GTE Master Savings Trust (the "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 Master
Trust assets. At December 31, 1995 and 1994, the Plan owned 18% and 17%,
respectively, of the assets in the various investment funds and portfolios
that comprise 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 (see Note 5).
Trustee
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 and portfolios of the
Plan. Expenses of administering the Plan and related funds and portfolios,
including fees and expenses of the Trustee, are charged to the participants'
accounts. GTE Service Corporation, a subsidiary of GTE, is the plan
administrator.
Plan Modification
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.
(2) Accounting Policies:
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles which require that estimates
and assumptions be made that affect reported amounts. Actual results could
differ from those estimates.
Investments are stated at market value determined from publicly stated
price information, if available; otherwise, the estimated fair value is
used. Guaranteed investment contracts are stated at cost plus accrued
GTE CORPORATION
GTE HOURLY SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS - (Continued)
interest. Net investment gains and losses include both unrealized gains and
losses on investments held by the Plan at year end and realized gains and
losses on sales of Plan investments during the year. Net unrealized and net
realized gains and losses are based on the value of the investments at the
beginning of the Plan year or at the time of purchase if acquired during the
Plan year. For 1995 the GTE Stock Fund, had a realized gain of $10.1
million and an unrealized gain of $135.5 million.
(3) Contributions:
The Plan is funded by employee contributions up to a maximum of 16% of
compensation and by employer contributions in shares of GTE common stock
ranging from 50% to 75%, depending on the collective bargaining agreement,
of the initial 6% of the employees' contributions not withdrawn during the
Plan year. The employee's matching contribution is credited following the
close of each calendar year to the accounts of employees 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 1995 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
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 were
based was limited to $150,000.
GTE matching contributions for the 1995 Plan year consisted of 438,798
shares of GTE common stock. In general, participants cannot redirect these
shares into other investment choices. Employer contributions receivable in
the GTE Stock Portfolio were $21.1 million and $20.3 million at December 31,
1995 and 1994, respectively.
(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 income tax. Management amended the
Plan in 1995 to comply with the final rulings under 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 qualifies under
Sections 401(a), 401(k) and 501 of the Code will be received in due course.
(5) GTE Master Savings Trust:
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).
In the Master Trust, funds are invested in contracts with insurance
companies which represented 68% of the conservative strategy pool consisting
of 57 investment contracts held with 20 insurance companies. These insurance
companies, excluding Mutual Benefit Life Insurance Company (Mutual Benefit)
GTE CORPORATION
GTE HOURLY SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS - (Continued)
and Confederation Life Insurance and Annuity Company (Confederation)
discussed below were rated A- or better by Standard & Poor's as of
December 31, 1995 and 1994. The contracts are included in the financial
statements at contract value, which approximates fair value, as reported by
the insurance companies.
Contract value represents contributions made under the contract, plus
earnings, less withdrawals and administrative expenses. Investment
contracts are normally set at a fixed rate through maturity, which is also
the minimum crediting interest rate. Limitations on guarantees for normal
investment contracts are dependent on the credit worthiness of the insurance
company. Synthetic investment contracts ("Synthetics") are determined by an
internal rate of return calculation that equates market value and book value
at the expected average life of the securities. The Synthetics interest
rate is reset quarterly but has no minimum crediting rate. Limitations on
Synthetics are dependent on the credit quality of the underlying securities.
The investment contracts had average yields of 6.9% at December 31,
1995. The crediting interest rate for the investment contracts, excluding
Mutual Benefit and Confederation, had a range from 5.28% to 8.90% at
December 31, 1995. The investment contracts, excluding Mutual Benefit and
Confederation, bear interest rates ranging from 5.28% to 8.75% and have
scheduled maturities from January 1, 1996 to May 25, 2001.
At December 31, 1995, the income pool had an investment contract with
Mutual Benefit which represented approximately 4% of the conservative
strategy pool's investments and approximately 1% of the Master Trust
investments. At December 31, 1995, this investment is carried at contract
value of $36.5 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 participated in
the plan and received a new contract which preserves principal and extends
maturities, with minimum interest and premium payments over the
rehabilitation period. During 1995, the contract was credited with interest
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. There is
currently a reserve of $900,000 pending final resolution of the
rehabilitation.
At December 31, 1995, the income pool had three investment contracts
with Confederation, which represented approximately 2% of the conservative
strategy pool's investments and is 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. At
December 31, 1995, the workout of the appropriation of assets had not been
completed. The investments are carried at contract value of $14.9 million
in the Master Trust.
GTE CORPORATION
GTE HOURLY SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS - (Continued)
The following schedules reflect the Master Trust net investments by
fund as of December 31, 1995 and 1994 and investment income for the year
ended December 31, 1995.
December 31,
Investments in Master Trust: 1995 1994
(thousands of dollars)
Fidelity funds:
Equity - Income Fund $ 212,302 $ 152,380
Overseas Fund 104,147 117,757
U.S. Equity Index Collective Trust Fund 164,358 112,306
Retirement Government Money Market Portfolio 107,307 78,287
Magellan Fund 464,931 307,397
Broad Market Duration Collective Trust 1,034 779
Conservative Strategy Portfolio 494,246 515,488
Conservative Growth Strategy Portfolio 250,779 221,646
Moderate Growth Strategy Portfolio 335,534 257,401
Long-Term Growth Strategy Portfolio 265,100 204,259
Other funds:
GTE Stock Portfolio 1,655,820 1,196,697
ESOP Shares Fund Allocated 240,375 138,199
ESOP Shares Fund Unallocated 781,322 586,450
Loan Fund 169,028 176,034
Income Portfolio 8,605 8,351
Total $5,254,888 $4,073,431
Year Ended December 31, 1995
Dividends Net Investment
& Interest Gain
Investment Income in Master Trust: (thousands of dollars)
Fidelity funds:
Equity - Income Fund $12,068 $ 36,722
Overseas Fund 2,398 6,300
U.S. Equity Index Collective Trust Fund - 42,519
Retirement Government Money Market Portfolio 5,262 -
Magellan Fund 26,621 86,549
Broad Market Duration Collective Trust - 145
Conservative Strategy Portfolio - 40,747
Conservative Growth Strategy Portfolio - 34,052
Moderate Growth Strategy Portfolio - 59,439
Long-Term Growth Strategy Portfolio - 48,061
Other funds:
GTE Stock Portfolio 72,189 513,120
ESOP Shares Fund Allocated 10,304 70,602
ESOP Shares Fund Unallocated 34,932 244,258
Loan Fund 10,885 -
Income Portfolio - 593
Total $174,659 $1,183,107
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 HOURLY SAVINGS PLAN
(Name of Plan)
Date June 26, 1996 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 Statements on Form S-8
(File Nos. 33-65025 and 33-46612).
ARTHUR ANDERSEN LLP
Stamford, Connecticut
June 26, 1996
