<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to 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 1-3090
GTE FLORIDA INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 59-0397520
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
600 Hidden Ridge, HQE04B12-Irving, Texas 75038
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code 972-718-5600
(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 the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
----- -----
The Company had 23,400,000 shares of $25 par value common stock outstanding at
October 31, 1996. The Company's common stock is 100% owned by GTE Corporation.
<PAGE> 2
PART I. FINANCIAL INFORMATION
GTE FLORIDA INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ----------------------------
1996 1995 1996 1995
---------- ---------- --------- ----------
(Thousands of Dollars)
<S> <C> <C> <C> <C>
REVENUES AND SALES
Local services $ 161,221 $ 154,488 $ 493,788 $ 461,467
Network access services 122,964 110,779 378,727 336,104
Toll services 17,390 20,487 54,550 62,112
Other services and sales 62,284 57,846 179,263 170,289
----------- ----------- ----------- -----------
Total revenues and sales 363,859 343,600 1,106,328 1,029,972
----------- ----------- ----------- -----------
OPERATING COSTS AND EXPENSES
Cost of services and sales 133,179 145,929 407,308 404,230
Selling, general and administrative 59,038 54,353 159,465 160,169
Depreciation and amortization 90,325 75,271 256,243 216,680
----------- ----------- ----------- -----------
Total operating costs and expenses 282,542 275,553 823,016 781,079
----------- ----------- ----------- -----------
OPERATING INCOME 81,317 68,047 283,312 248,893
Interest-net 14,289 16,423 44,767 48,022
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 67,028 51,624 238,545 200,871
Income taxes 25,100 19,850 90,520 75,950
----------- ----------- ----------- -----------
NET INCOME $ 41,928 $ 31,774 $ 148,025 $ 124,921
=========== =========== =========== ===========
</TABLE>
Per share data is omitted since the Company's common stock is 100% owned by GTE
Corporation (GTE).
See Notes to Condensed Consolidated Financial Statements.
1
<PAGE> 3
GTE FLORIDA INCORPORATED AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in Millions)
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS
- ---------------------
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ------------------------
1996 1995 1996 1995
----- ----- ----- ------
<S> <C> <C> <C> <C>
Net income $41.9 $31.8 $148.0 $124.9
</TABLE>
Net income increased 32% or $10.1 and 18% or $23.1 for the three and nine
months ended September 30, 1996, respectively, compared to the same periods in
1995. The three and nine month increases are primarily due to higher revenues
and sales, partially offset by higher operating costs and expenses, including
higher depreciation expense due to changes in plant balances, one-time
adjustments and prospective rate changes.
Revenues and Sales
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1996 1995 1996 1995
------ ------- ------- -------
<S> <C> <C> <C> <C>
Local services $161.2 $154.5 $ 493.8 $ 461.5
Network access services 123.0 110.8 378.7 336.1
Toll services 17.4 20.5 54.5 62.1
Other services and sales 62.3 57.8 179.3 170.3
------ ------ -------- --------
Total revenues and sales $363.9 $343.6 $1,106.3 $1,030.0
</TABLE>
Total revenues and sales increased 6% or $20.3 and 7% or $76.3 for the three
and nine months ended September 30, 1996, respectively, compared to the same
periods in 1995.
Local service revenues increased 4% or $6.7 and 7% or $32.3 for the three and
nine months ended September 30, 1996, respectively, compared to the same periods
in 1995. The number of switched access lines increased 5% for both the three and
nine months ended September 30, 1996, which generated additional revenues of
$6.1 and $16.1, respectively. The increases also reflect growth of $3.3 and $8.7
in sales of CentraNet(trademark) and custom calling features, such as
SmartCall(trademark). Additionally, the year-to-date increase reflects a $9.5
favorable settlement recorded in the first quarter of 1996 from a previous rate
case discussed in Other Matters. The three and nine month increases are
partially offset by $1.7 and $3.7 decreases in private line and public telephone
services.
Network access service revenues increased 11% or $12.2 and 13% or $42.6 for the
three and nine months ended September 30, 1996, respectively, compared to the
same periods in 1995. Minutes of use increased 8% for both the three and nine
months ended September 30, 1996, which generated additional revenues of $5.9
and $20.4, respectively. The three and nine month increases are also related
to growth in special access revenues of $2.4 and $7.3 and higher end user
access charge revenues of $1.3 and $3.3 associated with access line growth.
The net effect of the changes in interstate access revenues associated with the
Federal Communications Commission's (FCC) 1995 and 1996 price caps resulted in
additional revenues of $5.3 during the nine month period.
Toll service revenues decreased 15% or $3.1 and 12% or $7.6 for the three and
nine months ended September 30, 1996, respectively, compared to the same
periods in 1995. These decreases are primarily due to the introduction of
optional discount calling plans, which effectively lowered intrastate long
distance rates, and 10XXX intraLATA toll competition. These decreases are
slightly offset by an increase in toll volumes.
2
<PAGE> 4
GTE FLORIDA INCORPORATED AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued)
Other services and sales revenues increased 8% or $4.5 and 5% or $9 for the
three and nine months ended September 30, 1996, respectively, compared to the
same periods in 1995. These increases are related to a $1 and $3.4 growth in
Personal Secretary(trademark) voice messaging services, additional equipment
sales of $1.5 and $4.4 and a $1.1 and $2.7 increase related to the timing of
directory publications.
Operating Costs and Expenses
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- ---------------------------
1996 1995 1996 1995
--------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Total operating costs and $282.5 $275.6 $823.0 $781.1
expenses
</TABLE>
Total operating costs and expenses increased 3% or $6.9 and 5% or $41.9 for the
three and nine months ended September 30, 1996, respectively, compared to the
same periods in 1995. The increases primarily reflect increases in
depreciation expense of $15.1 and $39.6, mainly due to changes in plant
balances, one-time adjustments and prospective rate changes, increases of $5.3
and $10 in uncollectibles and an increase of $1.5 related to the reserve for
inside wire maintenance settlement costs recorded in the third quarter of 1996.
The three and nine month increases are also due to a $1.7 and $3.5 increase in
costs related to actuarial adjustments to the Company's benefit plans. The
three and nine month increases are partially offset by decreases of $9.5 and
$4.3 in digital switching software upgrades and a $3.8 and $2.7 reduction in
labor and benefit costs associated with productivity gains from process
re-engineering and other cost containment programs. The impact of $5.5 in
pension settlement gains recorded in the second quarter of 1995 was partially
offset by $2.5 of settlement gains recorded in the first quarter of 1996 which
resulted from lump-sum payments from the Company's pension plans.
Other (Income) Expense
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest - net $14.3 $16.4 $44.8 $48.0
Income taxes 25.1 19.9 90.5 76.0
</TABLE>
Interest - net decreased 13% or $2.1 and 7% or $3.2 for the three and nine
months ended September 30, 1996, respectively, compared to the same periods in
1995, which reflects lower interest payments associated with the high-coupon
debt refinancing program initiated during the fourth quarter of 1995.
Income taxes increased 26% or $5.2 and 19% or $14.5 for the three and nine
months ended September 30, 1996, respectively, compared to the same periods in
1995. These increases are primarily due to corresponding increases in pre-tax
income.
3
<PAGE> 5
GTE FLORIDA INCORPORATED AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued)
CAPITAL RESOURCES AND LIQUIDITY
Management believes that the Company has adequate internal and external
resources available to meet ongoing operating requirements for construction of
new plant, modernization of facilities and payment of dividends. The Company
generally funds its construction program from operations, although external
financing is available. Short-term borrowings can be obtained through
commercial paper borrowings or borrowings from GTE. On July 1, 1996, the
Company began participating with other affiliates in a $1,500 syndicated line
of credit to back up commercial paper borrowings. Through this shared
arrangement, the Company can issue up to $300 of commercial paper.
The Company's primary source of funds during the first nine months of 1996 was
cash from operations of $392.8 compared to $333.5 for the same period in 1995.
The year-to-year increase in cash from operations primarily reflects improved
results from operations, partially offset by an increase in the Company's
working capital requirements. Cash from operations is also being utilized to
fund the Company's re-engineering plan.
The Company's capital expenditures during the first nine months of 1996 were
$187 compared to $198.6 for the same period in 1995. The 1996 expenditures
reflect the Company's continued access line growth and modernization of current
facilities and introduction of new products and services, including broadband
digital services and switched digital services. The Company anticipates lower
capital expenditures during the remainder of 1996 compared to 1995, as future
capital expenditures related to the deployment of broadband video networks will
be incurred by Media Ventures Incorporated (Media Ventures), a separate
subsidiary of GTE. The video network originally constructed by the Company was
transferred at its cost of $10.4 to Media Ventures in the third quarter of 1996
(see discussion in Other Matters).
Cash used in financing activities was $201.3 during the first nine months of
1996 compared to $135.4 for the same period in 1995. Cash used in financing
included dividend payments of $173.7 in the first nine months of 1996 compared
to $117.6 for the same period in 1995. Short-term financing, including the net
change in affiliate notes, increased $43.5 for the first nine months of 1996,
compared to a decrease of $48.2 for the same period in 1995. In May 1995, the
Company received a capital contribution of $50 from GTE to improve the
Company's financial position.
OTHER MATTERS
In connection with the re-engineering plan, during the first nine months of
1996, costs of approximately $39.6 have been incurred, including $30.4 to
re-engineer customer service processes and $9.2 to re-engineer administrative
processes. Since the plan's inception at the beginning of 1994, costs of
approximately $132 have been incurred, including $88.8 to re-engineer customer
service processes and $19.2 to re-engineer administrative processes. The
restructuring costs also include $24 to consolidate facilities and operations
and other related costs. These expenditures were primarily associated with the
closure and relocation of various service centers, software enhancements and
separation benefits associated with employee reductions. Implementation of the
re-engineering plan is expected to be substantially completed by the end of
1996. As of September 30, 1996, $62.3 remains in the restructuring reserve
which management believes is adequate to cover future expenditures.
4
<PAGE> 6
GTE FLORIDA INCORPORATED AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued)
On August 8, 1996, the FCC published its Report and Order (Order) containing
rules implementing Section 251 of the Telecommunications Act of 1996 (the
Telecommunications 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 Telecommunications 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, including Florida. Arbitration hearings began in October 1996 to
determine the prices and terms of unresolved issues. State commission
decisions are expected to be issued over a period extending through the first
quarter of 1997.
During 1995 and the first six months of 1996, the Company had expended $10.4 on
the construction of its broadband video dialtone network in Clearwater,
Florida. In June 1996, the City of Clearwater, Florida approved a cable TV
franchise application which enabled Media Ventures to begin offering cable
service on June 24, 1996. As a result, the network originally constructed by
the Company was transferred at its cost to Media Ventures in the third quarter
of 1996. All future cable services will be offered by GTE through Media
Ventures.
In 1996, GTE, through a separate subsidiary, began offering long distance
service to its customers in selected states, including Florida, marketed under
the name GTE Easy Savings Plan(service mark). GTE plans to offer this service by
December 31, 1996 in all 50 states, including the 28 states where it currently
offers local telephone service.
The Company submitted its 1996 annual interstate access filing on April 2,
1996, utilizing the FCC's interim price cap rules. On June 24, 1996, the FCC
ordered all LECs subject to price cap regulation, including the Company, to
update their GDP-PI inflation factors through the fourth quarter of 1995.
Overall, the final 1996 interstate access filing resulted in an annual price
reduction of $1, effective July 1, 1996.
5
<PAGE> 7
GTE FLORIDA INCORPORATED AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued)
On January 21, 1993, the Florida Public Service Commission (FPSC) issued an
order effective January 6, 1993 to reduce rates by $14.5. This order
established a midpoint return on equity of 12.2% for 1993 and beyond for all
state ratemaking purposes. The Company filed a motion for reconsideration of
the rate order and the FPSC lowered the rate reduction by $0.8. The Company
filed an appeal of various aspects of the FPSC's rate case decision with the
Florida Supreme Court. Oral arguments were heard by the Court on January 31,
1994. On July 7, 1994, the Court issued its opinion accepting the Company's
argument that the FPSC should not have made a $4.8 adjustment for expenses
associated with affiliate transactions and remanded this issue to the FPSC.
Effective May 2, 1995, the FPSC approved a $4.8 increase to certain local
rates; however, it did not approve a surcharge to recover lost revenues for the
period that the wrongful decision was in effect. Consequently, the Company
filed an appeal of the surcharge issue with the Florida Supreme Court. On
February 29, 1996, the Florida Supreme Court reversed the FPSC's surcharge
decision, finding that the Company is entitled to recovery of its erroneously
disallowed expenses for the period of May 27, 1993 through May 3, 1995. On
remand, the FPSC approved a one-time surcharge; therefore, the Company recorded
$9.5 of revenues in the first quarter of 1996. The Company billed the
surcharge in October 1996.
In July 1995, the Florida Legislature passed a bill which replaces earnings
regulation with price regulation and opens the local-exchange to competition.
One provision of the bill requires intrastate access rates that are higher than
interstate access rates be reduced by at least 5% annually until parity with
1994 interstate access rates is attained. The estimated impact of the
intrastate access rate reduction is $7.7 annually. The rates from the first
annual filing under these provisions were effective October 1, 1996.
In April 1996, the FPSC issued an order which established the rates, terms and
conditions for interconnection between the Company and alternative
local-exchange carriers (ALECs). The Company filed for reconsideration of the
order which the FPSC denied. On October 11, 1996, the Company appealed this
order with the Florida Supreme Court.
In June 1996, the FPSC ruled on the rates, terms and conditions for the resale
of the Company's services by ALECs. On July 22, 1996, the Company also
appealed this order to the Florida Supreme Court and requested a stay of the
FPSC's order pending the Court's review.
Eleven separate class action lawsuits have been brought against the Company and
five of its affiliates relating to the provision of inside wire maintenance
services. All cases are in different stages in the various legal systems. On
August 8, 1996, a preliminary settlement was reached in one of the cases. The
Court has conditionally certified this case as a national class of plaintiffs
for settlement purposes. While all cases have not yet been consolidated, it is
GTE's intent to consolidate all pending lawsuits and effect a nationwide
settlement of all inside wire claims. A fairness hearing will be held on
December 18, 1996. This hearing will allow for any objections to the
settlement and could finally approve the settlement. If accepted, all pending
lawsuits would be dismissed and future lawsuits would be precluded from 1987 to
the date of settlement. Management believes that the Company has adequately
provided for this settlement in its financial statements.
6
<PAGE> 8
GTE FLORIDA INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
-------------------- -----------------
(Thousands of Dollars)
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash and temporary investments $ 17,966 $ 3,066
Receivables, less allowances of $29,564 and $17,717 325,102 332,842
Notes receivable from affiliate -- 5,412
Inventories and supplies 31,226 17,733
Deferred income tax benefits -- 9,394
Other 6,283 7,961
---------- -----------
Total current assets 380,577 376,408
---------- -----------
PROPERTY, PLANT AND EQUIPMENT, at cost 4,060,225 3,935,080
Accumulated depreciation (2,186,960) (1,985,482)
---------- -----------
Total property, plant and equipment, net 1,873,265 1,949,598
---------- -----------
OTHER ASSETS, primarily employee benefit plans 140,839 118,765
---------- -----------
Total assets $ 2,394,681 $ 2,444,771
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Short-term obligations, including current maturities $ 45,722 $ 78,634
Accounts payable 102,518 125,435
Taxes payable 37,252 876
Accrued interest 15,892 9,111
Accrued payroll costs 31,054 38,177
Dividends payable 124,071 34,027
Accrued restructuring costs 62,319 101,905
Deferred income tax liabilities 6,767 --
Other 50,448 47,934
---------- -----------
Total current liabilities 476,043 436,099
---------- -----------
Long-term debt 786,082 785,155
Deferred income taxes 192,072 199,598
Employee benefit plans 145,954 117,050
Other liabilities 6,718 3,293
---------- -----------
Total liabilities 1,606,869 1,541,195
---------- -----------
SHAREHOLDERS' EQUITY:
Preferred stock 60,096 60,096
Common stock (23,400,000 shares issued) 585,000 585,000
Additional paid-in capital 50,289 50,289
Retained earnings 92,427 208,191
---------- -----------
Total shareholders' equity 787,812 903,576
---------- -----------
Total liabilities and shareholders' equity $ 2,394,681 $ 2,444,771
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
7
<PAGE> 9
GTE FLORIDA INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------------
1996 1995
------------ ----------
(Thousands of Dollars)
<S> <C> <C>
OPERATIONS
Net income $ 148,025 $ 124,921
Adjustments to reconcile net income
to net cash from operations:
Depreciation and amortization 256,243 216,680
Deferred income taxes 8,635 25,116
Provision for uncollectible accounts 31,888 18,914
Change in current assets and current liabilities (54,945) (50,262)
Other-net 2,992 (1,885)
----------- -----------
Net cash from operations 392,838 333,484
----------- -----------
INVESTING
Capital expenditures (187,039) (198,609)
Proceeds from the transfer of assets 10,434 --
----------- -----------
Net cash used in investing (176,605) (198,609)
----------- -----------
FINANCING
Long-term debt retired (71,090) (19,590)
Dividends (173,745) (117,556)
Capital contribution from GTE -- 50,000
Increase (decrease) in short-term obligations,
excluding current maturities 12,500 (53,600)
Net change in affiliate notes 31,002 5,385
----------- -----------
Net cash used in financing (201,333) (135,361)
----------- -----------
Increase (decrease) in cash and temporary investments 14,900 (486)
Cash and temporary investments:
Beginning of period 3,066 10,527
----------- -----------
End of period $ 17,966 $ 10,041
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
8
<PAGE> 10
GTE FLORIDA INCORPORATED AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) 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,
which consist 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
financial statements and the notes thereto included in the Company's
1995 Annual Report on Form 10-K.
(2) Reclassifications of prior year data have been made, where appropriate,
to conform to the 1996 presentation.
9
<PAGE> 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits required by Item 601 of Regulation S-K.
(12) Statement re: Calculation of the Consolidated Ratio of Earnings
to Fixed Charges
(27) Financial Data Schedule
(b) The Company filed no reports on Form 8-K during the third quarter of
1996.
10
<PAGE> 12
SIGNATURE
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 Florida Incorporated
------------------------
(Registrant)
Date: November 13, 1996 William M. Edwards, III
------------------------
William M. Edwards, III
Vice President - Controller
(Principal Accounting Officer)
11
<PAGE> 13
EXHIBIT INDEX
Exhibit
Number Description
-------- ------------------------------------------------------
12 Statement re: Calculation of the Consolidated Ratio
of Earnings to Fixed Charges
27 Financial Data Schedule
<PAGE> 1
Exhibit 12
GTE FLORIDA INCORPORATED AND SUBSIDIARY
STATEMENT OF THE CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
(Thousands of Dollars)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1996
------------------
<S> <C>
Net earnings available for fixed charges:
Income from continuing operations $148,025
Add - Income taxes 90,520
- Fixed charges 53,746
--------
Adjusted earnings $292,291
========
Fixed charges:
Interest expense $ 47,138
Portion of rent expense
representing interest 6,608
--------
Adjusted fixed charges $ 53,746
========
RATIO OF EARNINGS TO FIXED CHARGES 5.44
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 17,966
<SECURITIES> 0
<RECEIVABLES> 354,666
<ALLOWANCES> 29,564
<INVENTORY> 31,226
<CURRENT-ASSETS> 380,577
<PP&E> 4,060,225
<DEPRECIATION> (2,186,960)
<TOTAL-ASSETS> 2,394,681
<CURRENT-LIABILITIES> 476,043
<BONDS> 786,082
0
60,096
<COMMON> 585,000
<OTHER-SE> 142,716
<TOTAL-LIABILITY-AND-EQUITY> 2,394,681
<SALES> 1,106,328
<TOTAL-REVENUES> 1,106,328
<CGS> 407,308
<TOTAL-COSTS> 823,016
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44,767
<INCOME-PRETAX> 238,545
<INCOME-TAX> 90,520
<INCOME-CONTINUING> 148,025
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 148,025
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
