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 September 30, 1996
..................
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, CT. 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 961,821,513 shares of $.05 par value common stock outstanding
(excluding 18,882,784 treasury shares) at October 31, 1996.
<TABLE>
PART I. FINANCIAL INFORMATION
GTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
(In Millions)
<S> <C> <C> <C> <C>
REVENUES AND SALES
Local services $1,520 $1,459 $ 4,564 $ 4,309
Network access services 1,168 1,081 3,461 3,240
Toll services 643 658 1,859 1,939
Cellular services 660 574 1,906 1,602
Directory services 386 330 1,008 916
Other services and sales 967 894 2,790 2,587
Total revenues and sales 5,344 4,996 15,588 14,593
OPERATING COSTS AND EXPENSES
Cost of services and sales 1,981 1,849 5,850 5,479
Selling, general & administrative 969 884 2,885 2,652
Depreciation and amortization 949 930 2,819 2,730
Total operating costs and expenses 3,899 3,663 11,554 10,861
OPERATING INCOME 1,445 1,333 4,034 3,732
OTHER (INCOME) EXPENSE
Interest expense 289 286 857 846
Interest capitalized (7) (9) (28) (25)
Interest income (15) (15) (42) (42)
Other - net (26) (15) 6 25
241 247 793 804
INCOME BEFORE INCOME TAXES 1,204 1,086 3,241 2,928
Income taxes 448 391 1,227 1,109
NET INCOME $ 756 $ 695 $ 2,014 $ 1,819
EARNINGS PER COMMON SHARE $ .78 $ .72 $ 2.07 $ 1.88
DIVIDENDS DECLARED PER COMMON SHARE $ .47 $ .47 $ 1.41 $ 1.41
AVERAGE COMMON SHARES 965 970 971 969
The accompanying notes are an integral part of these statements.
-1-
</TABLE>
GTE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated net income for the third quarter of 1996 was $756 million, or
$.78 per share, compared with $695 million, or $.72 per share, in the third
quarter of last year. The results for the third quarter of 1995 include an
after-tax gain on the sale of nonstrategic telephone properties of $11
million, or $.01 per share. Excluding the impact of this gain, earnings per
share for the third quarter of 1996 increased 10 percent over last year.
For the nine months ended September 30, 1996, net income was $2.01 billion,
or $2.07 per share, compared with $1.82 billion, or $1.88 per share last
year. The results for the nine months ended September 30, 1996 and 1995
include after-tax gains on sales of nonstrategic telephone properties of $8
million, or $.01 per share and $11 million, or $.01 per share, respectively.
Excluding the impact of these gains, earnings per share for the first nine
months of 1996 increased 10 percent over the first nine months of 1995.
Operating income for the third quarter and first nine months of 1996 rose 8
percent to $1.45 billion and $4.03 billion, respectively. This increase
reflects increased revenues and the favorable effects of ongoing cost
reduction programs, partially offset by higher selling and marketing costs
associated with GTE's national advertising campaign and the launch of new
revenue opportunities.
Consolidated revenues and sales for the third quarter of 1996 totaled $5.34
billion compared with $5.00 billion in the year-ago quarter. The increase
is driven by the growth in customer lines and network usage, the number of
cellular customers served, and new and enhanced telecommunications services.
Consolidated revenues and sales for the first nine months of 1996 totaled
$15.59 billion compared with $14.59 billion in the same period last year.
For the third quarter of 1996, minutes of use of GTE's domestic
local-exchange network for long-distance calling grew at an annual rate of
10.8 percent, while total domestic access lines increased 7.4 percent over
last year to 19.5 million. Access lines per employee, a key indicator of
productivity, increased from 268 a year ago to 314, representing a 17.2
percent improvement. Internationally, GTE services an additional 5.8
million access lines.
Domestic cellular-service revenues in the third quarter of 1996 totaled $607
million, a 15 percent increase over the same period last year, as customer
growth continued. During the third quarter of 1996, GTE added 150,000 new
domestic cellular customers bringing total U.S. customers served to
3,393,000, an increase of 20 percent over a year ago, excluding properties
sold in 1995. Growth at GTE's international operations increased total
cellular customers by 23 percent, excluding properties sold in 1995,
bringing total cellular customers served worldwide to over 4 million.
In connection with Telephone Operations' re-engineering plan, during the
first nine months of 1996, costs of approximately $172 million have been
incurred, including $148 million to re-engineer customer service processes
-2-
GTE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
and $24 million to re-engineer administrative processes. Since the plan's
inception at the beginning of 1994, 286 work centers have been consolidated
to 58 and workforce reductions of approximately 16,000 have occurred
resulting in total costs of $1,030 million, including $733 million to
re-engineer customer service processes and $127 million to re-engineer
administrative processes. The restructuring costs also include $170 million
to consolidate facilities and operations and other related costs. These
expenditures were primarily associated with the closure and relocation of
the various centers, software enhancements and separation benefits
associated with employee reductions. Implementation of the re-engineering
plan is expected to be substantially completed by year-end 1996. As of
September 30, 1996, $340 million remains in the restructuring reserve which
management believes is adequate to cover future expenditures.
GTE is one of the largest publicly held telecommunications companies in the
world. GTE is also the largest U.S.-based local telephone company and a
leading cellular-service provider, with wireline and wireless operations
that form a market area covering about one-third of the country's
population. Outside the United States, where GTE has operated for more than
40 years, GTE serves over 6 million customers. GTE is also a leader in
government and defense communications systems and equipment, aircraft
passenger telecommunications, directories and telecommunications-based
information services and systems.
Other (Income) Expense
Other-net includes the equity in earnings of unconsolidated subsidiaries,
which includes GTE's ownership interests in international joint ventures.
For the third quarter and first nine months of 1996, the equity in earnings
of unconsolidated subsidiaries was $86 million and $168 million,
respectively, reflecting increases of $54 million and $111 million from the
respective year-ago periods. These increases primarily reflect improved
operational performance and the favorable effects of currency translation at
CANTV, the Venezuelan telephone company in which GTE owns a 20.4% interest.
Other-net also includes pre-tax gains resulting from the sales of
nonstrategic cellular properties of $10 million for the first nine months of
1996. This compares to similar gains recorded in the prior year third
quarter and first nine months of $27 million and $65 million, respectively.
In addition to the gains recorded on the sales of cellular properties,
Other-net for the first nine months of 1996 includes a pre-tax gain of $12
million related to the program to sell or trade a small percentage of
nonstrategic domestic local-exchange telephone properties. Other-net for
the third quarter of 1995 includes a pre-tax gain of $16 million, related to
the program to sell or trade a small percentage of nonstrategic domestic
local-exchange telephone properties.
-3-
GTE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
CAPITAL RESOURCES AND LIQUIDITY
Cash from operations for the first nine months of 1996 totaled $4.39 billion
compared with $3.87 billion during the same period in 1995. The increase in
cash from operations reflects the improved operating results during the
first nine months of 1996, combined with lower interest payments and overall
improvement in working capital requirements.
Cash used in investing activities totaled $2.55 billion in the first nine
months of 1996 compared with $3.42 billion in the first nine months of 1995.
Proceeds from sales of assets for the first nine months of 1996 included
approximately $261 million from the sales of the Atlanta and Denver personal
communications services ("PCS") licenses. These transactions, which were
announced in early 1996, approximated book value and closed during the
second quarter of 1996. Acquisitions and investments for the first nine
months of 1995, included approximately $350 million expended to acquire PCS
licenses during the Federal Communications Commisssion's ("FCC") auction
process, as well as $256 million to acquire the 10 percent ownership of
Contel Cellular Inc. that GTE did not already own.
Capital expenditures, for the first nine months of 1996, totaled $2.68
billion compared with $2.81 billion in the same period last year. For the
full year 1996 capital expenditures are expected to be approximately $4.2
billion compared with $4.0 billion in 1995. 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
mobile-cellular, to increase capacity and continue to improve and expand the
network.
Cash used in financing activities for the first nine months of 1996 totaled
$1.52 billion compared with $286 million in the first nine months of 1995.
In August 1996, GTE's Board of Directors authorized the repurchase of up to
25 million shares of GTE common stock in the open market or in privately
negotiated transactions. The repurchase of shares will occur from
time-to-time through July 1997, depending upon market conditions, and may be
either suspended or discontinued. The shares will be used to satisfy the
requirements of GTE's employee benefit and dividend reinvestment programs.
The repurchase program is in addition to the 20 million share buy-back
program announced in August 1995 which has been completed. During the first
nine months of 1996, $1.37 billion of dividend payments and $817 million
expended for the repurchase of approximately 19.2 million shares of GTE
common stock, were partially offset by $373 million received through GTE's
employee stock purchase and dividend reinvestment plans.
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. On July 1, 1996, GTE installed a
two-part $4 billion syndicated line of credit to back up commercial paper
-4-
GTE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
borrowings and for working capital requirements. Part one is a five-year
$2.5 billion facility for GTE. Part two is a 364-day $1.5 billion facility
for certain of its telephone companies. In addition, GTE's international
operations have unused lines of credit under other facilities of
approximately $300 million.
RECENT DEVELOPMENTS
On August 8, 1996, the Federal Communications Commission ("FCC") published
its Report and Order ("Order") containing rules implementing Section 251 of
the Telecommunications Act of 1996 ("Act") dealing with interconnection,
unbundling of network elements and wholesale prices and other terms for
competitive entry into local exchange service ("Competitive Entry Terms").
On August 9, 1996, the FCC released its Second Report and Order implementing
the provision of number portability and dialing parity in accord with the
Act.
GTE believes that if the Order were implemented as drafted, it would cause
irreparable harm to local-exchange carriers ("LECs") by providing unfair
advantages to other carriers who will compete with the LECs in providing
local service in the LEC's local territory.
On September 16, 1996, GTE filed an appeal and motion for stay of the Order
with the United States Court of Appeals for the District of Columbia. This
appeal argued that the FCC had no jurisdiction to impose national pricing
rules for what is essentially local service. This appeal was subsequently
transferred to the Court of Appeals for the Eighth Circuit together with
appeals by other LECs and state regulatory commissions. On October 15,
1996, the Eighth Circuit granted a partial stay. The stay delays
implementation of the Order's pricing provisions and associated rules, as
well as the rules requiring GTE and other LECs to permit requesting carriers
to select terms and conditions from various agreements between them and
other carriers for purposes of interconnection. Additionally, the Court
scheduled oral argument on the merits for the week of January 13, 1997. On
November 12, 1996, the Supreme Court denied applications to vacate the stay
filed by the FCC and various companies seeking to enter the local-exchange
business.
While GTE cannot predict the outcome of the Court's final decision, GTE
intends to continue to vigorously present its position in Court.
GTE is continuing to negotiate with requesting carriers over the terms of
interconnection, unbundled network elements and resale rates. In some
cases, the parties have been unable to agree within the statutory period for
negotiation and have gone to arbitration before various state regulatory
commissions. It is expected that in late November 1996, the first state
commission decisions determining the prices and terms of unresolved issues
will be released. Subsequent decisions are expected to be issued over a
period extending through the first quarter of 1997.
-5-
GTE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
In March 1996, the California Public Utilities Commission ("CPUC") approved
rules permitting local resale competition effective March 31, 1996. The
CPUC required GTE to provide interim wholesale discounts of 7 percent on
basic residential service and 12 percent on toll and business services to
future resale competitors. On October 31, 1996, the Administrative Law
Judge arbitrator assigned to AT&T's arbitration request submitted his
report. The arbitrator continued the interim wholesale discount and
proposed prices for unbundled network elements which enable AT&T to serve
customers with a combination of GTE and AT&T facilities and for
interconnection.
The CPUC approved the merger of Contel of California into GTE California in
April 1996. As part of this order, the CPUC ordered $69.7 million of merger
savings to be returned to the ratepayers of both companies, which represents
half of the total savings expected to be realized by this merger. GTE has
provided for the impact of this decision in its financial statements. GTE
received approval to return these savings to local, toll, and access
customers over a five-year period beginning in mid-1996.
On May 8, 1996, the CPUC denied GTE's motion to suspend the application of
the price cap formula for 1996. The impact of the 1996 price cap filing, a
reduction of approximately $40 million, was flowed-through to ratepayers
beginning July 1, 1996. The price cap formula will be suspended for 1997
and 1998.
GTE's 1996 annual interstate access filing was approved by the FCC in June
1996. Overall, the rates result in $18.3 million of price reductions,
effective July 1, 1996.
GTE began offering long-distance service to its customers in selected states
during the first quarter of 1996. To date, the service, marketed under the
name "GTE Easy Savings Plan"SM, is available to GTE customers in 25 states
(Alabama, Arkansas, Arizona, California, Florida, Hawaii, Idaho, Illinois,
Indiana, Iowa, Kentucky, Michigan, Minnesota, Missouri, Nebraska, New
Mexico, Nevada, North Carolina, Ohio, Pennsylvania, South Carolina, Texas,
Virginia, Washington, and Wisconsin). GTE plans to offer this service by
December 31, 1996 in all 50 states, including the 28 states where it offers
local telephone service.
In April 1996, the Venezuelan government lifted foreign exchange controls
allowing the local currency to move to a market-based exchange rate. As a
result, the local currency devalued by approximately 65 percent. However,
due to the mix of local currency and U.S. dollar denominated assets and
liabilities, the devaluation did not have a significant impact on GTE's
results. Fluctuations in currency exchange rates have not been significant
since the initial devaluation.
-6-
GTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1996 1995
(In Millions)
ASSETS
CURRENT ASSETS:
Cash and temporary investments $ 652 $ 332
Receivables, less allowances
of $284 and $263 million 4,189 4,227
Inventories and supplies 818 719
Deferred income tax benefits 154 330
Other 342 284
Total Current Assets 6,155 5,892
PROPERTY, PLANT AND EQUIPMENT, at cost 52,584 50,947
Accumulated depreciation (30,177) (28,510)
Total Property, Plant and Equipment, net 22,407 22,437
INVESTMENTS AND OTHER ASSETS:
Employee benefit plans 3,476 3,058
Franchises, goodwill and other intangibles,
net of accumulated amortization of $467
and $404 million 2,507 2,765
Investments in unconsolidated companies 1,819 1,745
Other assets 1,188 1,122
Total Investments and Other Assets 8,990 8,690
Total Assets $37,552 $37,019
The accompanying notes are an integral part of these statements.
-7-
GTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1996 1995
(In Millions)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term obligations, including
current maturities $ 1,640 $ 2,156
Accounts payable and accrued expenses 3,487 3,858
Taxes payable 1,065 890
Accrued restructuring costs 340 512
Dividends payable 473 476
Other 457 420
Total Current Liabilities 7,462 8,312
Long-term debt 13,578 12,744
Employee benefit plans 4,841 4,638
Deferred income taxes 1,292 1,203
Minority interests in equity of subsidiaries 2,301 2,230
Other liabilities 1,120 1,021
Total Liabilities 30,594 30,148
SHAREHOLDERS' EQUITY:
Common stock - shares issued 980,234,768
and 977,483,844 49 49
Additional paid-in capital 7,237 8,049
Retained earnings (deficit) 1,035 (534)
Guaranteed ESOP obligations (582) (603)
Treasury stock - 18,528,801 and 2,423,284
shares, at cost (781) (90)
Total Shareholders' Equity 6,958 6,871
Total Liabilities and Shareholders' Equity $37,552 $37,019
The accompanying notes are an integral part of these statements.
-8-
GTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30
1996 1995
(In Millions)
Operations
Net income $2,014 $1,819
Adjustments to reconcile net income to net
cash from operations:
Depreciation and amortization 2,819 2,730
Change in current assets and current
liabilities, excluding the effects of
acquisitions and dispositions (588) (836)
Deferred income taxes and other - net 147 161
Net cash from operations 4,392 3,874
Investing
Capital expenditures (2,679) (2,814)
Acquisitions and investments (252) (772)
Proceeds from sales of assets 335 150
Other investing - net 40 12
Net cash used in investing (2,556) (3,424)
Financing
Common stock issued 373 286
Purchase of treasury stock (817) (124)
Long-term debt and preferred securities issued 1,656 810
Long-term debt and preferred securities retired (416) (528)
Dividends (1,372) (1,368)
Increase (decrease) in short-term obligations,
excluding current maturities (1,012) 618
Other - net 72 20
Net cash used in financing (1,516) (286)
Increase in cash and temporary
investments 320 164
Cash and temporary investments:
Beginning of period 332 323
End of period $ 652 $ 487
Cash paid during the period for:
Interest $ 717 $ 775
Income taxes 916 765
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
herein have 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 only 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 1995 Annual Report on Form 10-K.
Reclassifications of prior year data have been made in the accompanying
condensed consolidated financial statements where appropriate to
conform to the 1996 presentation.
(2) PROPERTY SALES:
In connection with the program to sell or trade a small percentage of
nonstrategic domestic local-exchange telephone properties, during
the first quarter of 1996 and the third quarter of 1995, GTE recorded
pre-tax gains of $12 million and $16 million, which increased net
income by $8 million, or $.01 per share and $11 million, or $.01 per
share, respectively.
-10-
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.
(27) Financial Data Schedule.
(b) GTE filed a report on Form 8-K dated September 19, 1996,
under Item 5, "Other Events." No financial information was
filed with this report.
-11-
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: November 12, 1996 By Lawrence R. Whitman
.............................
Lawrence R. Whitman
Vice President and Controller
Date: November 12, 1996 By Marianne Drost
.............................
Marianne Drost
Secretary
-12-
<TABLE>
Exhibit 11
GTE CORPORATION AND SUBSIDIARIES
CALCULATION OF EARNINGS PER COMMON SHARE
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
(In Thousands)
<S> <C> <C> <C> <C>
Consolidated net income $755,978 $694,810 $2,014,067 $1,818,983
Adjustments to net income:
Add - Preferred dividend requirements on
dilutive convertible preferred stocks - 134 - 403
Interest expense, net of tax
effect, on employees' stock plans 900 675 1,713 1,277
Total adjustments 900 809 1,713 1,680
Adjusted consolidated net income $756,878 $695,619 $2,015,780 $1,820,663
Average common shares 965,498 970,243 970,574 968,934
Adjustments to common shares:
Add - Dilutive convertible preferred stocks - 513 - 523
Employees' stock and stock option plans 4,617 4,104 3,994 3,934
Total adjustments 4,617 4,617 3,994 4,457
Adjusted average common shares 970,115 974,860 974,568 973,391
EARNINGS PER COMMON SHARE:
Primary (1) $.78 $.72 $2.07 $1.88
Fully diluted (2) $.78 $.71 $2.07 $1.87
(1) Computed by dividing consolidated net income 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 plans and stock options are computed according to the
"treasury stock" method.
(b) Consolidated 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
GTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF THE RATIO OF EARNINGS TO FIXED CHARGES
(Thousands of Dollars)
(Unaudited)
<CAPTION>
Nine Months Ended Years Ended December 31
September 30, 1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Net earnings available for fixed charges:
Income from continuing operations $2,014,067 $2,537,949 $2,440,869 $ 971,978 $1,760,704 $1,491,317
Add (deduct) -
Income taxes 1,227,170 1,466,426 1,532,482 567,747 966,589 662,860
Interest expense 857,013 1,150,625 1,139,233 1,298,234 1,475,670 1,574,746
Capitalized interest (net of
amortization) (9,963) (22,971) (6,045) (3,421) (4,931) (14,791)
Preferred stock dividends of Parent - 5,598 9,910 17,825 26,331 36,785
Dividends on preferred securities of
subsidiaries 80,007 98,604 18,252 22,162 23,429 25,317
Additional income requirement on preferred
dividends of subsidiaries 7,659 9,664 11,426 12,739 12,671 11,006
Minority interests 117,889 145,437 140,464 112,335 112,425 103,626
Portion of rent expense representing
interest 97,608 128,034 139,715 153,058 196,533 210,698
4,391,450 5,519,366 5,426,306 3,152,657 4,569,421 4,101,564
Deduct - Minority interests (196,921) (246,678) (242,937) (236,944) (248,979) (247,284)
Adjusted earnings available
for fixed charges from
continuing operations $4,194,529 $5,272,688 $5,183,369 $2,915,713 $4,320,442 $3,854,280
Fixed Charges:
Interest charges $ 857,013 $1,150,625 $1,139,233 $1,298,234 $1,475,670 $1,574,746
Dividends on preferred secrities
of subsidiaries 80,007 98,604 18,252 22,162 23,429 25,317
Additional income requirement on preferred
dividends of subsidiaries 7,659 9,664 11,426 12,739 12,671 11,006
Portion of rent expense representing
interest 97,608 128,034 139,715 153,058 196,533 210,698
1,042,287 1,386,927 1,308,626 1,486,193 1,708,303 1,821,767
Deduct - Minority interests (50,564) (70,052) (68,096) (78,421) (86,504) (89,479)
Adjusted fixed charges $ 991,723 $1,316,875 $1,240,530 $1,407,772 $1,621,799 $1,732,288
Ratio of Earnings to Fixed Charges - continuing
operations 4.23 4.00 4.18 2.07 2.66 2.22
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1996
<CASH> 652
<SECURITIES> 0
<RECEIVABLES> 4,189
<ALLOWANCES> 0
<INVENTORY> 818
<CURRENT-ASSETS> 6,155
<PP&E> 52,584
<DEPRECIATION> 30,177
<TOTAL-ASSETS> 37,552
<CURRENT-LIABILITIES> 7,462
<BONDS> 13,578
<COMMON> 49
0
0
<OTHER-SE> 6,909
<TOTAL-LIABILITY-AND-EQUITY> 37,552
<SALES> 15,588
<TOTAL-REVENUES> 15,588
<CGS> 11,554
<TOTAL-COSTS> 11,554
<OTHER-EXPENSES> 6
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 857
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